Containment measures to limit health shock lead to economic shock

Audio 03:17

By: Guillaume Naudin

The global covid-19 pandemic has hit the continent of Europe in particular, causing tens of thousands of deaths. The containment measures taken to limit or spread the health shock lead to an economic shock. And the decisions taken to support the economy are testing European rules.

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For the moment, the management rules are officially suspended. The 3% public deficit, the limitation of public debts to 60%, in short the famous Maastricht criteria, as well as the stability programs aimed at absorbing these debts, all this will be discussed AFTER the coronavirus crisis. Because the economic emergency is to deal with the most urgent, to support the activity and the companies that need it.

For that too, the usual rules are relaxed.

From the outset, support from national states for businesses, which was in principle prohibited, was made possible in the form of guarantees up to a limit of 500,000 euros, but the European Commission plans to go much further. It is now a question of allowing the States to supply equity capital to companies meeting criteria of good governance and which would be temporarily in difficulty due to the cessation of their activity. We think first, but not only, of the airlines and in particular in the case of France, the national airline Air France. Except that it is akin to outright subsidy and that it is not really in tune with European software based on free and undistorted competition.

This software was already questioned before the coronavirus crisis

Remember the Franco-German anger when the Commission rejected the Alstom-Siemens alliance in the rail sector for reasons of competition law. At the time, Paris and Berlin had deplored that these rules prevent the constitution of European champions of world size vis-a-vis the giants of the sector, in particular Chinese. Finally, Alstom turned to the Canadian Bombardier. It's a bit the same for the acquisition of Atlantic shipyards by the Italian Fincantieri in shipbuilding. The French commissioner for the internal market Thierry Breton asked the question of the revision of these rules, as he also said that Europe should no longer have the sole aim of reducing prices for the consumer.

But not everyone agrees

Of course not. First of all, this would be seen as a step backwards by the European institutions and in particular the Commission, which do not want these easings to become sustainable. The risk is that European unity will be undermined by national policies. Making the model evolve also supposes an evolution of European law and texts. This would require an agreement between the member countries, whose difficulties in coordinating since the start of the crisis have been seen. The recent discussion on the mutualisation of the debt linked to the crisis, the famous coronabonds , showed deep fractures between the countries of the South, like Italy and Spain, and the so-called "frugal" countries, of North 'Europe for which it is a red line. The discussions are therefore far from having ended and we will have to talk about it again at the end of the crisis when it arrives, but there it will no longer be a question of economics, but of politics.

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• Coronavirus
• Containment
• Economic crisis
• France
• European Union

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