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June 09, 2020

The EU and the re-emergence of the state

The pandemic brought the state back as a prime actor. In the EU framework this is bound to end up in conflicts: about the role of the EU itself, and in terms of divergence amongst member states. After the lockdown, citizens expect the state to make the economy more resilient and to deal with external shocks. The rules-based EU has been set up for a different purpose: to limit the role of the state in markets. The EU is not set up to handle the current task. It will need to reform. 

A new paper for Chatham House by Pepijn Bergsen and others argues that the shift from markets to state would need a different EU with more focus on welfare, solidarity and reduction of inequality between states. But how to get there is not obvious. It is one of those I-would-not-start-from-here moments.  

EU member states could not even agree on a crisis response, so how will they find a consensus for deep structural reforms of the EU? In the past decades the EU renewed itself through treaty change to reflect a political consensus among member states. This consensus is no longer there. Working around treaty change, as was done throughout the eurozone crisis, may be possible in areas where the treaties have no say. But it is a lot harder when the problem lies within the treaty. Under EU rules, the current interventionist fiscal policy will eventually require a drastic return to fiscal balance. Restrictions on workers imposed during the pandemic may continue, increasing tensions between member states and threatening the principle of free movement in the EU. State-aid rules are clearly challenged by member states' moves to protect their industries, and will have to change to allow a more strategic industrial policy to emerge for the single market. And the eurozone has seen a re-emergence of the north-south divide, increasing the risk of a popular surge against the eurozone itself. 

Member states may agree on small changes that can be integrated into the existing EU framework, such as exemptions of investment from deficit calculations. Or they can find consensus for a large structural change of the EU itself. If no consensus can be achieved, which is the most likely scenario, frictions between the single market and single currency on the one hand, and political preferences of individual member states on the other, will increase. The pandemic brought about a shift from markets to states. This needs to be addressed in the EU framework either way. 

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June 09, 2020

This is not 1968.

The cliche is that a week is a long time in politics. Covid-19 and the anti-racism riots reminded us of this famous observation from Harold Wilson. The perceived mismanagement of the Covid-19 lockdown has reduced the popularity of Donald Trump and Boris Johnson. Joe Biden and Sir Keir Starmer have been on the ascendant. The global mass demonstrations against racism initially seemed to have reinforced the trend, but we began to sense a backlash when we saw the looting of shops in Brussels' Avenue Louise, a petition for the removal of a statute of King Leopold II, the violent removal of a statute in Bristol, and the defacement of a statute of Winston Churchill in Westminster. As often in situation like these, opinion polls do not tell us what we need to know. Who would tell a pollster that they are not supporting protests against racism? Donald Trump and Boris Johnson, who have been unleashing strict law and order policies, may end up benefitting. They will do so not by attracting voters from the left, but by mobilising their core support. 

It is the exception, not the rule, that large-scale street protests change the course of history. The French revolution is the most famous example. To a lesser extent the protests of 1968 changed the politics in some countries, like Germany, while they triggered opposite reactions in others, like the US. The gilets jaunes protests in France were clearly not of this kind either.

In the UK, several UK commentators have already written off Boris Johnson because of the way he handled the Covid-19 crisis. One even predicted that Johnson would be ousted by his party later this year. We don't think so. Johnson is a master at the art of bouncing back. And he may have done so yesterday. He hit the right tone when he supported the cause of the demonstrations, but not the violence in Bristol and Westminster, or the breach of the social distancing rules which is a feature of virtually all the demonstrations. He was joined by two British Asian cabinet ministers. One was Priti Patel, the home secretary, who is now unleashing a law-and-order agenda. Rishi Sunak, the otherwise mild-mannered chancellor, probably found the harshest words for the demonstrators: he called them criminals who perpetuate the lie that the temporary excitement of destroying statutes was the same thing as change.

These demonstrations are a Wilsonian double-whammy: they changed politics for a week. But that week ended.

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