The Varied Responses of EU Institutional Actors to the COVID Crisis

Transcript

Vivien Schmidt: Good morning. I am Vivian Schmidt, Jean Monnet Professor of European Integration in the Pardee School at Boston University and co-chair of the European Union seminar at Harvard's Minda de Gunzburg Center for European Studies

Vivien Schmidt: I'm pleased to welcome you to our seminar on “The Varied Reactions of EU Institutions to the COVID Crisis.”

Vivien Schmidt: The seminar is part of a series of online seminars covering the European Union's institutional response to COVID-19. It’s co-sponsored by Harvard’s Center for European Studies and the Belfer Center’s Project on Europe and the Transatlantic Relationship at Harvard's Kennedy School

Vivien Schmidt: But also like to recognize the collaboration of World Boston, the German American Business Council, and the American Council on Germany. So just to note to participants this session is being recorded. We assume that in participating, you are all giving you consent to the recording.

Vivien Schmidt: Our panelists today are Sergey Lagodinsky Member of the European Parliament, Group of the Greens/European Free Alliance and all my Andre Sapir, Senior Fellow at Bruegel and Professor at the Université libre de Bruxelles. So before I introduce our speakers, I would like to introduce some of the people who are also here.

Vivien Schmidt: And that's Karl Kaiser, my co-chair at the Center and Adjunct Professor at the Kennedy School. And I think I see…yes, Executive Director, Cathryn Cluver Ashbrook, in the Belfer Center.

Vivien Schmidt: Who else? Vassilis Coutifaris who’s is at the Center for the Study of Europe, and many others. I think Sergio Fabbrini who's a Visiting Professor at Harvard this year, but unfortunately, given COVID, is, I think, coming in from Italy. Jolyon Howorth, who's a Senior Fellow at the Kennedy School and many more. I think there are too many for me to welcome all of you, but welcome to all of you in any case.

Vivien Schmidt: And so I'm delighted to welcome to very well-place members of the Brussels EU community to help enlighten us on the EU institutions’ responses to the pandemic.

Vivien Schmidt: These are perfectly placed people one on the inside, in the European Parliament. The other outside but very close in a think tank closely involved in advising EU institutions. So first introduce Sergey Lagodinsky, who's a member of the European Parliament, Group of the Greens and the European Free Alliance. Sergey is a German citizen. He was born in Russia. He's a member of the European Parliament (already said) Group of the Greens/ European Free Alliance. Until June 2019, he was Head of the European Union and North America Division of the Heinrich-Böll-Stiftung.

Vivien Schmidt: His special expertise lies in transatlantic relations, international and constitutional law, as well as law and politics of diversity and integration. His 2014 book, Context of Anti Semitism, explores the relationship between anti-Semitism and freedom of expression in Germany and an international law.

Vivien Schmidt: Prior to joining the Heinrich Böll Foundation, Sergey worked as lawyer for Orrick, Herrington & Sutcliffe LLP. He also served as Program Director and an Advisor to the Board for the Berlin office in the American Jewish Committee. In 2008, he was a Fellow at the New Responsibility Foundation. Sergey graduated from Humboldt University. He is a graduate of the Law Faculty of the University of Göttingen and also Harvard University. And, um, Masters in Public Administration. So, an alum of Harvard

Vivien Schmidt: Our other speaker Andre Sapir is a Belgian citizen and University Professor at the, Université libre de Bruxelles, a Research Fellow, the London-based Center for Economic Policy Research, and a Senior Fellow at Bruegel, the Brussels-based think tank.

Vivien Schmidt: Between 1990 and 2004, Andre worked for the European Commission first as Economic Advisor to the Director General for Economic and Financial Affairs and then as Principal Economic Advisor to President Prodi.

Vivien Schmidt: After leaving the Commission, he first served as External Member of President Barroso’s Economic Advisory Group. And then as member of the General Board of the European Systemic Risk Board based at the European Central Bank in Frankfurt. Andre has written extensively on European integration, international trade, and globalization. He holds a PhD in Economics from the Johns Hopkins University in Baltimore. And he is an elected member of the Academia Europaea and of the Royal Academy of Belgium and for Science and the Arts.

Vivien Schmidt: So, after this rather lengthy introduction…Our discussion today is about how the European Central Bank, European Council European Commission, and European Parliament are responding to the existential challenges facing the European Union during the corona virus pandemic.

Vivien Schmidt: I would like to open with a very general question to both speakers starting, I think, with Sergey, about how you see you the EU institutional actors’ response to the COVID-19 crisis. Is it enough? Not enough? By which institutions? And assuming that more could be done, what, and by which institution? So, just asking for short responses for now, about five minutes each. At which point, I’ll then follow-up questions for our two speakers for another 20 minutes or so. After which, we’ll open it up to the audience. So, Sergey, over to you.

Vivien Schmidt: You need to unmute

Sergey Lagodinsky: I need to unmute. Here you go. That's what happens when you try to be muted and not to disturb the chair. Um well, thank you for inviting me, and it's great to see a number of faces whom I know very well. Karl, Cathryn, it's a great to see you as well.

Sergey Lagodinsky: Because I only have five minutes to answer this fundamental question, maybe just briefly. It's never enough, Vivien. You know, we have a global crisis of unprecedented dimensions, so it will never be enough. But I think that if you look at member…at the actors, they all had a different mode of reacting to what has been going on. If you're talking about European Parliament, I would say we still in a hibernated mode. We hibernated right away at the beginning of the epidemic which was understandable, and I was also supporting that. We could not summon and we could not get together with people, with our colleagues from France and Italy, and all of us traveling through all the airports and getting together. What about staff? How do you deal with that? So, there were plenty of question. So, we hibernated, and we keep trying to get back to business, to get awake. And it's very, very difficult. Now we're getting into a fight with the President of the Parliament. A lack of crisis leadership on their behalf. And we can talk about this more in details. We, by now, the whole group and I, from the very beginning are very concerned about the role of the Parliament which has been damaged throughout these past weeks. If we look at the EU Commission, they had the bumpy start, but they are quite active now. And, with all fairness, I think it's important to mention the first couple of days, the Commission was not present at least publicly. But now, I would say even me being kind of in opposition (having an opposition perspective), I would not claim that the EU Commission is lacking and is missing on the stage.

Sergey Lagodinsky: Both the President and the Commissioners are very active on various on various issues. And we can also discuss later where they could be more or less active and in which way (and more productive). And then we have European Council and Member States, and I would say they are trying to get past their differences. That's what their mode is. The modus operandi now is trying to get agreed on issues, especially in financial area and also try to overcome the initial traumatizing feeling of lack of solidarity, something that hurt our southern friends very much, especially Italians. Something that was abused and is being abused by geopolitical rivals like China and Russia. And something where we have done a lot of damage without maybe meaning it. I don't even mention the story of masks from Germany that were stopped on the border. And this was more kind of a technical issue at the beginning, and it is overcome. But the damage has been done, and we're seeing it also in polls and polling in Italy, etc, etc. This is a huge problem and we have to keep this in mind when we're looking for ways out.

Sergey Lagodinsky: In terms of topics, I would say the three big, large topics that we're trying to tackle now and institutions are trying to tackle now is, of course, the health crisis, the path to recovery, there are ideas there that are being circulated and there we have a lot of food for discussion. We can also go into depth later which path that we're going to take as a European Union. And democracy: I think we shouldn't forget about that.

Sergey Lagodinsky: And also talk about that because this could be one victim of the crisis of the epidemics that would remain after it (our democracy, our parliamentarian democracy). And it's the last point I want to make: we should not forget that anything that we're doing, any topics that we're tackling now, in the midterm and long term, we will have to talk about European design and European place in this world. How we understand ourselves. What is our self-picture that comes out of this crisis? Because we will only be able to overcome this crisis if we understand what we are, and we haven't been able to so far.

Sergey Lagodinsky: So, maybe we need the crisis like that, as terrible as it is to kind of get our act together and to understand that we will only physically survive in this world if we integrate more and if we talk about acting together on the world arena. So, I'll stop here.

Vivien Schmidt: Great, thank you.Andre over to you.

Andre Sapir: Yeah, I'm going to give an answer to your question “Enough? Not enough?” from two perspectives. One as a citizen, and as a Belgian, as a European citizen. And one more lendly as an analyst – as an economist. But you know, as you read my CV an analyst who as an economist has been not only an academic but also very much involved in policy.

Andre Sapir: Now, as a citizen, I'll tell you the truth, and I see an Italian friend there. When I saw the situation initially in Italy, Sergio, I stopped watching the TV, and I started crying. I could not bear the images that I saw.

Andre Sapir: That reminded me of images that I had seen in Syria in a war situation. I could not believe that this was going on in Europe, and that there was not the necessary solidarity. This is not a blame about the EU institution. This is a blame about the way Europe (the countries, the citizens, everything) how it was working. There was really at the start, before the crisis, then spread to other countries, the situation in Italy really started to be extremely, extremely, extremely dire.

Andre Sapir: And I thought it was a complete shame. It was, as they say, unbearable to me as a person, as somebody who knows history, that this was this was going on. And, you know, we are rich countries, we are neighbors and, you know, it looked like this whole thing. You know, they were a few patients that were taken from Italy to Germany (10 of them), a few patients going to Switzerland, a few going to Austria. But we're talking of, I mean, ridiculous kind of numbers compared to the state of affairs. So, as a citizen, I found it absolutely unbearable.

Andre Sapir: As an analyst, I think the EU has not been doing badly given what the EU is. The EU is not a federation. There's no federal government. Health is not a competence of the EU. And, yes. there were no mechanisms at the EU level to deal with the with the crisis. I mean, nothing, nothing at all. There were no plans. There was nothing. There was no preparedness whatsoever, but that relates to the nature of the EU. We are not the federation. We are not like the United States. We are not the United States of Europe or the United States even of the Euro area. We are not that.

Andre Sapir: We are a confederation of states that share certain sovereignty in some areas. So, you know, I lived through the financial crisis and, you know, although not being any more in the Commission, I was still very, very closely involved. And there, there was a huge gap in the way the EU, with its make out of the Federation – or not Federation, but the Confederation – compared to the United States. Right. And that's why we had to create the banking union and all of those other stuff during the crisis.

Andre Sapir: But we were really caught by surprise, and we did not have the means to respond. The result was that the response in the US and in Europe (in the euro area) was very, very different. There was really a gap between the way Europe responded to the financial crisis and the way the US did. If I look at the situation now between the US and Europe, I don't see such a difference. Now you can say, well, you know, there are, there is a particular president in the United States, but it shows to me also that the issue of sharing of responsibility between the federal government, even in the US, a federation, between the federal government and the states. The fact that borders are also being closed sometimes (even in the United States!).

Andre Sapir: So the differences in terms of health conditions, you know, I'm from Belgium and indeed Belgium is the worst performing country of the entire EU in terms of number of deaths per million inhabitants. We are 500/600 deaths per million inhabitants compared to a country like Germany where it's about 50 or 60. 10 times more – a huge difference. But you see that exactly in the United States.

Andre Sapir: Between the state of New York, which is in a worse situation than in Belgium, and states like Montana, Wyoming, where they are very, very few deaths. So when I look at the health situation and even the economic situation, at the moment, I do not see the fact that we (not being equipped, the way we should be equipped, the way I wish, Europe was equipped to deal with such a situation) we are not responding that much worse than the United States. So that tells me also that the nature of the crisis, the fact that it is a completely different crisis than what we ever even imagined we could have. We were all caught by surprise.

Andre Sapir: Yes, we have all the facts. But I think Europe and, you know, that's why I say as an analyst if I compared to the US that as many more tools in principle. Well, the performance of Europe is not is not worse than the United States. So, I'm crying on the one hand, and I'm reassured, on the other, that looking across the Atlantic you guys are not doing much better if at all than we are.

Vivien Schmidt: Yeah, thank you Andre. Thank you both, Sergey and Andre. I just… thinking about the comparisons to the US, I would think perhaps the bar is a bit low right now, unfortunately. I actually want to continue with questions to Andre and then switch back to Sergey in a minute.

Vivien Schmidt: And because Andre, you mentioned the financial crisis and suggesting that now things seem better. Do you think that there are lessons learned from the eurozone crisis? For example, in terms of the ECB response?

Andre Sapir: So, I think yes. I think the ECB response…there was a bit of fumbling initially in March with the ECB response. And many of us were a bit concerned I should say at that at that stage. But did not last. So I would say that today the ECB response is very much a response of what one wishes. And again, very similar to what the Fed is doing. And what essentially we have at the moment (and I think we will come back to that in the discussion) we have essentially a license to borrow.

Andre Sapir: The state's, the corporations are basically free to borrow with the backup of the of the ECB. It's not quite monetary financing. That is not there, right? It's not there in the US. It's not there in Europe. It's not exactly printing of money, but it is the central bank intervening in more or less unlimited manner. Unlimited in the amount, not unlimited in time. And this is where at some stage, obviously, the fact that we are all accumulating a lot of debt may come back to haunt us. You know, how are we going to deal with this after the crisis? You know, for the moment, no problem. Even Italy does not really have, which is a huge debt, Italy does not have any problem to access the markets.

Andre Sapir: Italy can borrow as much as it wants. Whether it will be able to reimburse that debt that later, that's a different matter. But at the moment, it's been told, “Go ahead. Don't be shy and borrow.” Some obviously worried that, you know, what will happen once the tap is being turned off? And I think we should discuss that. But at the moment, the ECB is providing the room that is needed for government. Then, it's up to indeed, the governments to deal with, you know, picking up the pieces for later. Again, in our system, the ECB can only provide the room, cannot pick up the pieces.

Vivien Schmidt: Okay, thank you, Andre. So now over to Sergey. Speaking of picking up the pieces, how do you see the Council, the European Council, how would you assess its performance? Do you think it has learned the lessons? And I think we can differentiate between the early initial moment and what may be happening now.

Sergey Lagodinsky: Well, I mean, I tend to look at Council as mostly, you know, States. This is kind of my take. But I don't see that Council as it's…There are there different schools of looking at it.

Sergey Lagodinsky: I think that the Council has learned their lessons because what we are talking about mutualization of debt is something where countries, even the northern European countries have real… they admit that this is a real issue. And they admit that this is an issue we have to solve. If we're talking about the financial issues that Andre also mentioned

Sergey Lagodinsky: What we're having now is a discussion regarding how do you want to help southern European friends in terms of their market…credibility… their ability to borrow money to a lower percentage then or at all to get any money, especially considering that Italy is now in total debt. There are discussions, and I was today discussing it with the German ambassador to the EU at the Bundestag. What are the different ways?

Sergey Lagodinsky: So, it sounds like nitty gritty, but it is actually something that prevents the Council and Member States to get to a common position. So, for example, one question is should this financial backing be in terms of credits or loans or should this be a foregone subsidies? Another question is whether this credits and loans should be integrated into the new budget that we have been actually negotiating for the upcoming seven years? Or should this be separated? And all those questions. You can see them. You can load them with a kind of a political shading and you can say, you know, it is about liking solidarity. Germany and Netherlands don't want to, you know, to share solidarity. I'm going to be solidarity in debt.

Sergey Lagodinsky: But you can also see it, and again, I'm saying this because you know I'm more careful there maybe than some of my colleagues. There are various ways of structuring this financial solidarity.

Sergey Lagodinsky: So, for example, the European Parliament has called for the so-called recovery bonds that are not Coronabonds. This is a different construct. That means these are bonds that are, and Andre you correct me because you know on those issues. As I understand these are not bonds in terms of mutualizing that debt directly, but it is about getting loans and credits through EU institutions, through the EU itself. And by doing so, because the EU, of course, will be in debt (and this will be a common debt), but it's a different way of bonds.

Sergey Lagodinsky: And this is what some Northern Europeans are more open about. Then you have, of course, Eastern European perspectives who are very concerned not about the bonds, but they're very concerned about the budget. What is going to happen to the budget in the upcoming seven years?

Sergey Lagodinsky: That we will have to cut subsidies for agriculture, by the way, something that the French are also very concerned about. So, don't cut agriculture subsidies, don't help Italy, in terms of corona without, you know, at our expense.

Sergey Lagodinsky: So, there is this. I mean, this is European Union. There is this kind of whole mapping out of various interests. And even in the situation, which is very difficult that we're facing today, those interests are not gone. Yeah. And it's also very difficult cognitively for governments to get out of their past dependencies on the behavioral past and patterns and to understand that we're living in a totally different world. And if Italy is going to get out of the European Union, we all are, I don't want to use the word you shouldn't use on webinars for Harvard, but we were having a huge problem altogether.

Sergey Lagodinsky: So, kind of conveying this and communicating this and channeling this to the government is a very difficult task. And that's why I actually, you know, I don't want to go to the next step and talk about the Commission. But because you mentioned it, that I don't envy the Commission in the situation like that. I mean, in the task that they're having. And the Council has readily handed to the Commission this task of putting this whole mechanism together. We had the Euro Group which had some proposals (the three columns that they proposed). Then we had this this the meeting of Member States, and the Member States could not agree on a final statement. Also in order not to embarrass the Italian Prime Minister, who is totally under pressure in Italy, and there were a lot of grave concerns that if he comes back to Italy without Coronabonds, he will be gone.

Sergey Lagodinsky: So they didn't agree. And they asked, now, the European Commission, EU Commission to draft the design, as they say, architecture of this whole financial mess. In order for us to go forward. So good luck you, EU Commission. This is a very important, but the very, very difficult and ambitious task.

Vivien Schmidt: Thank you, Sergey. Now over to Andre. And actually, the obvious question is, is the Commission going to succeed in putting together a package for the European Recovery fund that will provide bonds that will create bonds that perhaps provides, what, grants to southern European countries or any country that finds itself in in great distress, including Belgium for example? Or loans which would then increase the debt of the Member States? And where does this European Recovery funds sit? I think I've read something about the Bank of International Settlements or sorry, the European Investment Bank as for it. But what can you tell us about how the condition is and whether it can actually succeed in devising some kind of program that would be acceptable to both North and South?

Andre Sapir: Okay, let me say two things. The first one is about the EU budget in general. So as Sergey said, you know, a couple of months ago, the Heads of States, the European Council, the heads of states and government met in Brussels for a long session trying to hammer out the next seven year budget. This was before the COVID crisis.

Andre Sapir: Every seven years, right, we have a new budget. A new financial framework that countries discuss. And this is always a very ugly discussion. It's a discussion between net contributors and net beneficiaries. This is the kind of discussion, you know, the rich ones, you know, how much do they want to give to the poor ones kind of discussion. And then there is the farmers. And there's all the discussion. But since the EU budget is essentially about transfers, those who are making net transfers want to give as little as possible. And those will receive the transfers, they want as big as possible a budget. And every seven years we have this difficult discussion, and the discussion was extremely hard a couple of months ago because one country, the UK, it just left the EU.

Andre Sapir: And the UK was a net contributed to the budget. So, you know, it was putting money in the kitty. In that sense, and some others were getting some of that money.

Andre Sapir: And those who were getting that money were saying that we want to continue to receive the same thing. So, they were telling already the other guys who could potentially replace the UK, “please, fill in for the shoes of the UK so that we continue to receive the same thing. And some countries that, you know, said “forget about that.”

Andre Sapir: So it was a very, very complicated discussion that they could not agree upon despite the very long, sort of all-night kind of sessions.

Andre Sapir: And this the current budget runs out in December of this year. This budget is based on the proposal of the Commission, but it has to be adopted by unanimity by all the Member States and by the European Parliament.

Andre Sapir: So it's a very complicated process. It has to go to each of the national Parliaments, it has to be ratified by all national parliaments. It has to go to the budgetary committees.

Andre Sapir: So it's something that takes several months. In other words, by June of this year, they need the new budget for next year, for sure, otherwise they won't be able to start the next year with a budget.

Andre Sapir: And now on top of the difficulty, the normal seven year plus the UK leaving adding to the difficulty. Now we have the coronavirus problem, and indeed the coronavirus issue is hitting some countries much more than others. And the countries that are being hit the most are Italy, Spain, France (countries also where tourism is a major issue). So not only the number of deaths, but when you look at recovery, the summer of this year is going to be a very complicated summer for countries that rely heavily on tourism. And that's, again, Italy, there is Greece, there's well there is Spain, Portugal, France. So you know you have countries that have been hit a lot by the health condition, then there is being hit a lot by the recovery and the tourists. So, lots of differences there, but you can see that the countries of southern Europe are pretty badly hit. And so, you know, the budget, the EU budget is only 1% of EU GDP. There is this issue “Let's do a recovery fund.”

Andre Sapir: A recovery to help, indeed, getting out of the hole where we are, but probably helping more countries that are the most hit (the countries of southern Europe). Now, if the budget remains the same as the budget that we had before, then you know 1% then you have to take some money from somewhere.

Andre Sapir: Most countries that were getting some of the money (net beneficiaries that is essentially Central and Eastern Europe) would have to give up some of the money for the country of the South. So, if the envelope remains unchanged, this is pretty tough. So, I think there is no way they can solve this problem which is super complicated politically without putting some additional money in the kitty. And then the question is: this money that they would put, where would it go, and how would it be spent? Would it be spent via loans that are made to countries? Or will it be in the form of transfers? Will it be, you know, what people are referring to as grants?

Andre Sapir: Now, the countries of southern Europe, they would like grants which is understandable. They would like to transfer from the countries less affected to the countries more affected. And, you know, one can do that via any mechanism, but in the end, that's what it means. It means to make a transfer.

Andre Sapir: So, the first question is how much more money they will be? Mrs. Merkel is declared to the German parliament that she and Germany should be willing to put some more money here. Maybe she is, maybe Parliament will be willing, how much money we don't know. All countries would have to be willing to put more money. It's not just Germany. It’ s not a bilateral gesture by Germany to the countries. It would be in the EU budget. So, other countries would have to contribute more. How much more will they be? Some people have been very ambitious saying, you know, today the budget is 1% we should double it for a period of time to 2%.

Andre Sapir: Okay, I would be in favor of that. I don't see that this will happen. But then the question will be, again, whatever more money they will be, how will it go to the Member States? I guess that most of it will be in the form of loans. I hope it will not be only in the form of loans. And in the form of loans, it would indeed be via the European Investment Bank. That is what the EU budget would do.

Andre Sapir: It would not make loans directly to countries. It would, in the budget, put some money aside to guarantee loans. And this would be to guarantee loans by the European Investment Bank. So, the Commission is not the bank.

Andre Sapir: The Commission does not make loan except once in a while to countries that have a balance of payment problems. And that was the case, for instance, Hungary, got some money, Romania, got some money, Latvia, got some money back in the financial crisis.

Andre Sapir: And they're sort of conditional loans. Here we are talking of unconditional loans. This is not the business of the Commission. The only thing that the Commission can do and the EU budget can do is put some money aside that would guarantee the loans by another institution, the European Investment Bank.

Andre Sapir: So, the more you put money aside for guarantees, the more you can make loans. And that's what will happen. And you know, when you hear some time figures like 1.5 trillion Euros for the recovery fund, this is in terms of loans. This is not what they would be in the budget, this would be guarantees that would allow loans to be made of 1.5 trillion for which you need much less money. You need maybe 15 times more since you can have a leverage ratio of about 15. So if you have 100 in the budget, you can multiply that by 15 and do loans for the EIB by 1500. That's the kind of thing they are discussing, and hopefully they will also be some money in this additional budget (in the EU recovery fund) that would be for transfers. So not in the form of loans, but in the form of transfers in one way or the other. Some maybe also for common projects, you know, research in health.

Andre Sapir: Some issues of the health sector in Europe in general being improved. So, they can be common projects taking place. That would be something that the Commission can deal with.

Andre Sapir: So, that's I think what we can expect. Most of it will be loans, but there will be some transfers. France is fighting to get some common projects. Some EU-wide projects in the field of health and also in some digital stuff like in artificial intelligence that would fit into that.

Vivien Schmidt: Okay, thank you. Andre, so back over to you, Sergey. And I suppose my question is what role can the European Parliament play in all of this? How would you, especially as a member of the Green Party, see the basically loans, rather than grants? And possibly not much done on climate change? Would you push for not simply health related bonds, but green bonds? Where is the European Parliament, I guess, in all of this?

Sergey Lagodinsky: Well, there is also difference between European Parliament and the Greens. We're not the largest group in the European Parliament, but sometimes, at least from outside, you can…I think Ms von der Leyen would like to go Green. And in fact, our group has just yesterday, presented our ideas for recovery plans.

Sergey Lagodinsky: And just an hour before that, or so, before the presentation of our group, Ms von der Leyen went in front of the camera and recorded her statement on the Green Recovery Plan of the European Commission. The problem with Ms von der Leyen, even though I am more on the supporting sides of hers in my group, but the problem with her, indeed, is that it's not always what is on the package. It’s what you will find inside the package. And that's the role of the European Parliament. I think that the European Parliament will have to watch very closely how this implementation and how the design of recovery will look like. Because we have Green Deal, which has been decided by the European Union and the European Commission has committed itself. Now in the working plan of the Commission that was leaked (the new working plan, the one that they adjusted to the post crisis), there were a lot of concerns that many things that were planned as part of the Green Deal were not found there anymore.

Sergey Lagodinsky: The resolution of the European Parliament that was issued on the crisis did include demands, both on social policies and on green policies that we will be watching very carefully. But for example, it did not include the Paris Agreement targets as a point of reference, something that we would have wished to have. And again, the, the questions will be in implementation. But to be honest, this is not just a European issue. We are just we are facing the same questions now within each individual country.

Sergey Lagodinsky: In Germany, the question that is now the big fight, which is upcoming, will be defined of conditionality of subsidies for the auto industry (for the car manufacturers) Of course, it is in the interest of the government to pacify the people, to secure their employment. And it is, by the way, also in the interest of the Green government of Baden-Württemberg, for example, to secure the auto industry working places there.

Sergey Lagodinsky: But it is, of coursem something different that we would envision. And for us, for many people in Europe, regardless of their budget question. I know many social democrats who think alike. It is also a chance, an opportunity, to generally and structurally rethink our way of doing economics, and doing economy, and doing industry, and production, etc, etc. And this is something that we expect and we'll be watching very closely how this will be implemented. But for now, it is very difficult to speak about any details because we are not even sure about the baskets, you know about what we're going to put into the basket.

Sergey Lagodinsky: The next step is indeed to see that the baskets are the right ones, and that the environmental concerns and social concerns will not be the ones that will be sold out, so to speak, in order to have stability or growth as soon as possible.

Sergey Lagodinsky: The issue of conditionality generally is an issue which goes beyond the green and sustainable issues. And this is something that Andre also mentioned. For example, the Netherlands is very much against unconditional either loans or subsidies because they say, “why should we unconditionally give Italy, a lot of money without Italians committing themselves to reforms?”

Sergey Lagodinsky: Another shading of conditionality is something that you wanted to maybe to address a little bit later, is the conditionality is regarding rule of law. Why should Hungry, like the case now, you may be so depressed on that, getting more money for now than Italy while dismantling their democracy? And it's a very tricky question. I'm not myself sure how I would answer it for now. I think it is important to watch this closely, and I think it is important to have safeguards that the funds will not be mismanaged and will not end in the pockets of Orban, and others of his surroundings.

Sergey Lagodinsky: But I'm not sure that we can easily, from a moral perspective, a put too high of conditions on helping people to survive the crisis.So it's, it's a very tricky question. Then we will have to find maybe other channels of how to get the money to the citizens around the governments. This is something that we've been discussing in Brussels. So there are plenty of very difficult questions regarding conditionalities about democracy, we can speak later, as I think you wanted to. But I just wanted to say that this conditionality question is not just a Green versus not Green. It's Green. It's about rule of law. it's about good management of resources. And it's about our moral understanding of what this money is for, all right? Do we have a moral right?

Sergey Lagodinsky: And what packages of money do we want to earmark with conditions and which not? Because for many it's matter of survival.

Vivien Schmidt: Right, thank you. Sergey and I'm just actually going to just ask you to follow up on your reference to questions of rule of law and democracy and ask a more general question about what is the EP doing about issues? And what can be done more generally about issues of lack of respect for rule of law, for the dismantling of the institutions of liberal democracy in countries, not only Hungry but also Poland and possibly other parts of Central and Eastern Europe in particular?

Vivien Schmidt: Just briefly, because I see that we're running out of time.

Sergey Lagodinsky: Yeah, well, the EP is doing what is best at doing: issuing resolutions. But, that can be quite a sign because the Commission is very timid in terms of addressing and criticizing the last package that we saw in Hungary and also there were quite timid in terms of Poland, but today it's changed.

Sergey Lagodinsky: And at least, the European Parliament is there, the safeguard of those issues. I'm a member of the Rule of Law Monitoring Group in our Home Affairs Committee, and we meet every week. And by the way, we're not talking just about Hungry. We have a special survey and a study that we have commissioned, and it is updated every other week regarding rule of law and democracy in times of the COVID crisis in many countries. Hungary and Poland is just one aspect.

Sergey Lagodinsky: We have problems and questions with Romania, we have questions with Bulgaria, and we have from different perspective also questions with Germany, for example, regarding freedom of assembly. Or, if we're talking about data protection and privacy, we have questions with Poland where the COVID app is mandatory for many citizens. And this is just one example of many others. So, we are concerned, very much concerned, about this tricky balance between, we used to say, security and freedom and liberty. Now it's probably health and liberty.

Sergey Lagodinsky: That that we have to balance out and we are concerned, like in case of Hungry, that some of those changes first of all, will be abused by the government. I mean what necessity did Orban have to issue laws banning transgender in the passports? And right away! After the emergencies laws were adopted. What the hell? It has nothing to do with the crisis. So, abusing this or in order to manipulate their political... The second question is, when it's going to stop?

Sergey Lagodinsky: There is no stopping. There is no final date in case of Hungry. They just dismantled the priorities of Parliament. They are going to be ruling by decree. Orban is going to be ruling by degree. And nobody said when this is going to end.

Sergey Lagodinsky: The government will decide when this is going to end. And this is not okay according to the standards of the European Parliament and of the European Commission. Reynders the Commissioner was very clear on that.

Vivien Schmidt: Thank you. I see that we have about only 10 minutes left for questions. So I'd like to open it up to the audience. And I wonder if, Karl, if you have a question you'd like to ask?

Karl Kaiser: Sergey, you are sitting in Berlin, i.e. in the capital of a country which is absolutely crucial in defining the nature of the help in Germany. In the past, along with the Netherlands was very instrumental in stopping anything that looks like a grant. Now…[inaudible] Whatever the amount is going to be, which means there will be an increase of the contribution because German is a net contribution, correct? But that is probably not enough. And my question to you is: is Germany willing? Do you sense a willingness in Berlin to move to a substantial grant system in the European Union? The good thing is that the AFD, which has always been one argument for being very cautious on grant and giving money away, so to speak, the AFD is not doing well.

Karl Kaiser: Will that increase the marginal maneuver of the Social Democratic Christian Democratic government, with the support of the Greens, I presume? And where do the Greens stand?

Sergey Lagodinsky: Thank you, Karl. Great to see you. Should we collect or should I answer right away?

Vivien Schmidt: Why don’t you just answer?

Sergey Lagodinsky: Yeah.

Sergey Lagodinsky: I don't think I mean, with all due disrespect to AFD, I don't think they play any role in those decisions whatsoever, and you know this, of course, as an expert on Germany. Who is the decisive two powers are the ruling parties. They have enough votes without anyone from the opposition. And the Greens, maybe on the Bundestag level.

Sergey Lagodinsky: But, I don't think that it is about AFD. I think I have the will probably might gain support because we have a very weird shift of discussion and disputes regarding the exit strategies AFD and FDP, the free liberals, are playing a quite a populistic role and kind of energizing a lot of people who are unhappy about the quarantine situation so far.

Sergey Lagodinsky: I heard, as far as my information goes, Merkel herself is not reluctant to invest more in that. But the party, the people around her, and the party, are those who are are conscious about the consequences.

Sergey Lagodinsky: I don't think that the popular… I think that the population and the citizens today are so overwhelmed by what by what was going on that I don't think that there will be kind of an informed and critical debate about the form of help beyond newspapers. I don't think that anyone now will start, you know, questioning and what we had during the Euro crisis in terms of Germany's paying for everyone.

Sergey Lagodinsky: I have a feeling we're in such a deep crisis that this is not going to be any more an issue. But the issue is indeed the willingness of the ruling parties. And also, to be honest, also some legal issues. I mean, when we talked today with Ambassador representing the view of the government. He said, you know, if we want to have a solution outside of budget with more loans and more debt, then we are going against the Treaty provisions that explicitly ban taking debt by the European Union. So they want to go through the budget. That's one of their issues, you know, let's kind of make the budget larger, and through the budget ,give the money away to the States. Rather than getting into debt and taking more and more debt, which is not possible without changing the Treaty, which is a huge process.

Sergey Lagodinsky: But, but I do think that there is more openness definitely more than during the euro crisis, on behalf of CDU and also, of course, on behalf of Social Democrats here. So, I'm more hopeful on that. But we were not there. And I don't think we will get anywhere close to coronabonds proper. It will be a solution around coronabonds with debt and going through European institutions, rather than issuing bonds with neutralized debt proper.

Sergey Lagodinsky: And even for that Italy was not ready and France, not ready, either. So they're working on kind of getting together then

Vivien Schmidt: Thank you. And now, Richard Rosen, and you have your hand up.

Richard Rosen: Yes, I understand that the focus of this webinar is on EU institutions and governments, but is there any significant discussion about the role that major corporations might play in helping ease the burden of people in different countries. Because if you look at where the money is, right, the cooperations more money than the EU budget. Certainly have greater profits. And many of them work on across national border basis. So, you know, in the US, obviously corporations play a major role in discussions of our, you know, bailouts. What happens in Europe?

Vivien Schmidt: Okay, Andre, I think that one's for you.

Andre Sapir: All right, I would say two things on that. Number one is that corporations are also asking for money from the state everywhere, right. That's number one.

Andre Sapir: I mean many corporations have problems, are working on, you know, with only a limited number of workers and with limited number of customers. So, you know, many of the corporations have been asking for assistance from governments. Not like they've profits that they can help to pay for the government, it’s the other way around.

Andre Sapir: They are trying to avoid to go to go bankrupt. Many of them, and some of them may still go bankrupt by the way depending on how long this will last. I mean, this is a topic which we did not discuss at all: the uncertainty about this. It's one thing to say, “Well, now the crisis is the health crisis is behind this and how do we get out of the hole?” Another one is to say that they may be a second wave, that we may not have airline functioning, we may not have all kinds of issues across the borders that may not be able to go through. And how long this will last we just, we just don't know.

Andre Sapir: What I see is work corporations are playing a role, and a very important one, is in the following manner: large corporations rely on if not on global value chains, certainly on regional value chains within Europe. Take an example to link this to the discussion we had a moment ago about Germany. The German automakers, they know very well that since Germany is the huge exporter (not just manufacturer but huge export of cars), they know very well that they need the market.

Andre Sapir: And that most of them market is not the global market. Sure, you know, Germany exports to…German cars export to the US. They exported to China, but most of them market is within Europe. So corporations understand very well that Europe is to be in good health in order for them to have customers. That's number one.

Andre Sapir: Number two: if you ask any German car manufacturer, they get parts that come from all over Europe, not only from Eastern Europe from Slovakia, also from the north of Italy. So if the north of Italy is not able to reopen for business, parts are not coming into Germany. We are so intertwined, both in terms of production and in terms of consumption. And so, when I speak to people in German industry, they are very much want the government indeed to take that into account.

Andre Sapir: So they may not like the idea of coronabonds. They may not like the Chancellors, but they like the idea that they will be able to sell their stuff to a market that is going to be revived. And they like to know that they will be able to get parts from their partners. From that viewpoint, ideologically, the transfers doesn't sound great.

Andre Sapir: But in in the more mercantilist manner, this is very, very important. So, and the corporations are pushing in that direction. They are pushing for EU-wide measures, pushing for Germany to help the EU economy, not just the German economy to revive.

Vivien Schmidt: Thank you. So we're just about out of time, but nonetheless, I'd like ask a sort of one to two minutes from each of you on if you had a crystal ball (two, three years hence) what future for the EU? Deeper integration, more positive feelings, greater trust amongst Member States? Or muddling through...problematic? Why don't we start with Sergey?

Sergey Lagodinsky: I think of the options, one, I would exclude. I don't think that muddling through that we would go. It's just in the new world, we will either have a chance of getting our act together and going towards a greater integration and harmonization in the EU. And I'm not a federalist ideologue, I never have been.

Sergey Lagodinsky: But I after this crisis, and after this baseless criticism by populists, those who always said the EU should not have competence in terms of health are coming now and saying, “You see you is not able to manage health.” Well, you have to decide. If you want the EU to be an actor that can act in crisis situation like this. And this is just the beginning.

Sergey Lagodinsky: What about the climate crisis that is also looming on the horizon? Or any other disease that can come? We need to be able to act an EU. The optimistic option is in three years that we have European Union, which is an example, a visionary example for the rest of the world in terms of sustainability and in terms of also rebalancing the relationship between markets and the state. I'm a market-oriented Green. But just as Macron is saying, we need to rethink a lot now in the course of this crisis. So, and the other option would be there will be no European Union if we don't get

there. So, this will be the alternative. But there will be no muddling through. I think those times are over. We could survive the Euro crisis like this, but we will not survive crisis like this.

Vivien Schmidt: Great, thank you. And, Andre.

Andre Sapir: Look, I'm done with this notion of, you know, Europe as an example for the world. I want Europe to be an example for its own citizens. That's, that's good enough to me. I think it's clear that there is a discrepancy between the name “European Union,” and what we are able to deliver. That discrepancy has to be solved in one way or the other. So indeed, one is to go forward or backward. Either we have to go back to be called the community or maybe as we were called even before that, cooperation. “The Organization for European Economic Cooperation.” Maybe we should be less ambitious and, you know, say, “Look guys, we are not a union. We are just trying to cooperate in some areas.”

Andre Sapir: Or indeed, we have to be true to the name “European Union,” and then, indeed, one has to learn the lesson both of the financial crisis and of this crisis. We cannot have crisis, a third crisis in another 10 years from now. And said this crisis is far from being over. It could last a year, maybe two years. It could be quite painful, long crisis,

Andre Sapir: The Union cannot operate in this manner. It has to be more ambitious and otherwise, indeed, I fear that, not that it will collapse, but that there would be huge amount of disappointment. And as I said, being an example for the world…I'm not there anymore. , I want us to be proud of our European Union and to do better.

Vivien Schmidt: Thank you so much to both of you for some wonderful, wonderful discussion. Illuminating remarks, and so please everyone join me in clapping, if only virtually for our speakers. Thank you so much.

Sergey Lagodinsky: Thank you. Thank you very much. It's great to be here.

Andre Sapir: I enjoyed it. Thank you.

Vivien Schmidt: Thank you.