Still on the European summit

The EU summit is still on, at the end of the second day. It is too early to comment on it, as I do not know what the outcome will be. But I said to a friend, a former ambassador, that I see it as positive that leaders spend a good amount of time trying to get to an agreement. They have in front of them big issues, with many possible consequences, and extremely high costs. These are no simple matters, and we are living in extraordinarily exceptional times. I would be worried if they decided to run through the issues, superficially and with no real commitment. It is true that some of them do have that kind of attitude. They are the lightweights. But the key players take these matters seriously. I can only appreciate that. To call names and badmouth them is a childish approach I do not accept.   

The most important question of the day

What kind of post-covid world is it in the making? That is the key question that should be in many minds. That is the debate that needs to take place. With realism and balance, with tolerance but accepting all types of opinions. The answer is obviously a complex one. And certainly not a positive one unless we can convince the leaders to change course. I doubt. The crisis is too big and most of them just want to throw money at it to minimise its effects. That is not change, that is not innovation. It is just the continuation of the recent trends, with all their shortcomings.

Pandemic and confusing days

The pandemic is still moving around, in our corner of the world. It is not just a problem in the Americas or elsewhere. It should continue to be seen as a dramatic challenge we all face, everywhere. European countries are opening up. But it would be a mistake to believe we are out of the woods. Every measure of prudence must be adhered to. And governments cannot stop the health education campaigns around the Covid. Better, they must be clear in their messages. And the strongest messages are about wearing masks, keeping a distance and avoid crowds, all types of crowds.

I know we are requested to find a balance between health and the economy. I am for the opening of the economic activities, including international travel. However, all of this must be implemented with a deep sense of civic and personal responsibility. Politicians, associations, and every citizen carry a good deal of responsibility. The roles and expectations must be clearly defined. Then, we know what to demand from each one. And what are the red lines we must follow.

There is a great concern with the economic recovery. In most European countries that is the main worry. I fully understand it. The shock is very deep, and the prospects of recovery are uneven, at best. In some countries, with weaker and less diversified productive basis, the prospects are indeed very sombre. I think the quickest way to recover is to let people be responsible in an environment that respects the sanitary norms and, at the same time, gives each one of us a chance to live in the “new normal” and take charge of our own destiny. This no time for unjustified constraints, beyond those that have a scientific reason.

It is also no time to keep children out of the schools. They must go back to a safe and well-organised classroom. They need to be in contact with their age group and their little friends. That is how the socialisation and the learning happen.

A new model of politics

The huge amount of resources that the European Union member States will have available for recovery is a golden opportunity to change what needs to be changed. That means, as I see it, to invest on health and social matters, on an economy that is friendlier to the environment, on the digital dimensions and on greater inclusion of those who have less income and insecure jobs. The funding of new projects should be guided by these concerns. This is a turning point and we cannot miss it. I am confident the Commission will provide the necessary guidance and will try to make sure the governments do respect the paradigm change. The real challenge is to prevent these monies are used to enrich the supporters of those in power. That will be the old tendency. But we are in a new era. The European Commission must ensure that the citizens in each State have enough power to stop the old clientelism and the ways of doing things that make some richer and the vast majority more vulnerable.

A stronger European Union

The European Recovery Fund, proposed by the President of the European Commission, was favourably received in the various capitals of the Member States. The Italians and the Spaniards were happy, on one side, and the Scandinavians as well, notwithstanding earlier positions regarding the need for conditionalities.

It is, in fact, a balanced plan, which reserves a good part of the resources for grant-type financing. And it adds an incredible amount of money to other resources already announced, either by the Commission or by the European Central Bank. Ursula von der Leyen demonstrated opportunity and vision. Her standing as head of the Commission comes out strengthened. Of course, behind all this, we can guess there is the support of Angela Merkel and Wolfgang Schäuble, who is now President of the German Federal Parliament and who continues to have a lot of power, on the domestic scene of his country. In the end, these things happen if the Germans are on board. They do not express it too loudly, but their voice is the determinant one in matters of common economic policies, agriculture excepted.

The ladies are in charge

Harvard professor Carmen Reinhart has just been appointed as the new Chief Economist at the World Bank. The Chief Economist at the IMF, Gita Gopinath, has also come from Harvard University. Both ladies have collaborated with Professor Ken Rogoff, from the same university. They might all think alike which is not the best approach in times of crisis. Diversity and contradictory opinions are much more creative, at a time when we have to imagine a new economic order. But they are all for debt forgiveness when the challenge is too big to be managed, which is not a bad approach. And they have studied financial crashes and deep national crisis extensively.

People say that when two economists discuss there are at least three divergent opinions. In this case, let us see if both ladies can bring fresh ideas to their institutions. The IMF and the WB will be very much in demand in many countries in the post-Covid situation. They must propose an approach that goes beyond austerity and keeps investments flowing across the globe, particularly in the direction of poorer countries.

The European recovery

Today, Chancellor Angela Merkel and President Emmanuel Macron stated they will advocate for the establishment of a €500 billion recovery fund. In their view, the money should be raised in the international capital markets by the European Commission, as a common pot aimed at helping the Member States seriously affected by the Covid-19 pandemic. The disbursements would be approved by the Commission, following the criteria that are yet to be established. It would also be the Commission that would have the responsibility to pay the markets back, meaning, the principal and the interests or dividends.

I am not sure this will work. Austria’s leader, Sebastian Kurz, has already voiced strong objections to such an idea. He does not want to see a recovery mechanism that is dispensing grants to the States. He is for loans. Loans make the leaders a bit wiser than just getting free money, he seems to believe. We can expect that other voices will join his own.

In view of this, my position is that most of the money should be channelled to fund joint multinational projects that would reinforce the European system and would have an impact on the EU’s strategic self-sufficiency in matters of public health, bioresearch and other critical emergency response mechanisms. The pandemic has taught us that the health sector is vital, not only for medical reasons but also because of its impact on the functioning of the economy. We cannot no longer talk about strategy without including the strengthening of our common capacity to deal with epidemics, critical hospital equipment needs and essential medicines. Money should also be spent on common logistics and rapid deployment networks.

It is also clear that the recovery fund must be operational soonest. There is urgency. We are not yet at the end of the crisis. The intensity of the pandemic can have a new surge at any moment. We must be better prepared this time. In addition, the economy of the most affected countries needs resources that would encourage new investments, in greener areas, and in matters that address the issues of income and social security. The priority should go for those projects that are fundamental for a stronger Europe and that are not too much dependent on resources and means of transportation we do not control.

This is a time to think differently. The fund, if it is thoughtfully planned and wisely administered, can become a tool for transformation and progress. The alternative is for it to become a reason for further divisions within the European space. Nobody wants that to happen.

Times of change

We all agree the economic recovery is pressing. Truly, we are confronted with extreme urgency. There are too many people without income, or with a reduced one, too many companies close to insolvency, plenty of sectors working below capacity. The economy is seriously disrupted, in many countries, including in the EU states. Speed is, therefore, the key concern, in the minds of the politicians as well as in the private sector.

Then, a number of intellectuals have come forward and said this post-pandemic time is the big opportunity to change direction and make the economy greener and people-friendly. I agree with their proposals. They are not all of them entirely realistic, but they are well-meaning and the right type of utopia we need to make this world a better place. It would be a mistake not to give attention to them.

There will be some changes, for sure. More people will be working from home, there might be less commuting, and we will witness a lot of pressure from the politicians for the entrepreneurs to bring home some of the investments made far away. There will be a new impetus to move on to a greater share of renewable sources of energy.

But the urgency might upset some of these proposals. Jobs, investments, and revenue generation will be the key criteria for decision-making. And they might not coincide with the new economy we would like to see. But there will be progress in that direction. People are coming out of this crisis with a different approach to life and their own priorities. That is why I think it is important to keep insisting on progressive modifications to the way we produce and trade goods, and a new approach to the worth of some services the pandemic has shown to be of essential importance to our daily lives. 

  

There will be a process of change. Not as much as we would like, but we should not give up. This is an appropriate time to talk about a more balanced world.

The trend is negative and must be stopped

Their power resides on the capacity to build collective fear. In different parts of the world, some governments are taking advantage of the pandemic to create extreme anxiety among their people. Then, they make sure, through all kinds of media platforms, that they are perceived as very decisive, able to take tough decisions to save as many lives as possible. Some of those measures go far beyond the necessary, from a public health perspective. They basically have a political purpose, to strengthen those in power. In addition, such radical measures allow the governments to hide the weakness of their national health systems, their extremely poor capacity to respond to emergencies. The truth is that many governments are just inept and cannot find the balance between an adequate health response and the mitigation of poverty. That incompetence and the political dividends they expect to draw from tough decisions are just ruining their countries. We are going back to a world that will combine despotism, increased inequality, and desperation. Can we accept that trend? The answer must be clear and strong.

Five fundamental questions

As I see it, there are five big questions on our European table. One, how to strike the balance between public health and the health of the economy? Two, what role should each State play and what are the limits the governments should not overstep? Three, what kind of societal changes should be promoted for a better type of human society in the post-Covid era? Four, what about the implications of this extraordinary crisis on the future of the European Union? And five, what will be the new shape of globalisation?

These are the key lines of reflection as we look ahead. The debate about each one of them is open. It is a complex one but must be conducted. The depth of the current crisis calls for a complete review of the way we have been doing business. Those who think that we just have to press the recovery button, and everything will be back to what we had in January are wrong. We are not going back.

Three challenges

Besides the public health challenge and the balanced approach to the opening of economic life, the third big issue we are confronted with is about democracy and freedom. Our governments are imposing too many limitations and controls on matters that have to do with our liberties and personal choices. We can accept such decisions for a while and with full justification. But they must be temporary. No way we can have a state of exception for extended periods of time. Pandemics are not treated with limitations of liberties and the deployment of police forces. That was the practise in the middle ages. They are treated with masks, disinfection, hygiene, distancing, and medical surveillance and advice. We must understand that governments love to control people. It is in their genes, even in our multiparty societies. And if they can, they will keep some form of control for an awfully long time. That could be the beginning of a regime change that we certainly do not want. In the end, we do not want to copy the Chinese government when it comes to human rights issues.

Hoping we will be sage and visionary

I can only hope that May will be a good transition month. I believe it can be if everyone in leadership positions understands that consultations and coordination between nations that have a similar destiny are crucial. Within the European Union, we need a renewed momentum, a stronger role coming from Brussels, and more discussions between key national leaders. There is no recovery if it is not done jointly.

Let the planes fly

One of my messages is clear. International travel should restart as soon as possible. There are enough means to control the health condition of passengers before departure and upon arrival. And the airlines can organise the space inside the planes, to guarantee a minimum of safety. This is a sector that is in dire straits. It must be given a chance to come back. But I am convinced we will see some big changes soon. The airlines will have to rethink their business model. And, in some cases, we might watch some companies just moving out of the business. Their viability is far from being possible. And we cannot have public money being spent just to keep them in the skies.  

The transition ahead of us

Many of us are now getting tired of the lockdown. This is, therefore, a dangerous period, when people start looking for opportunities to escape the quarantine and become more critical of the authorities. They are also feeling the squeeze when it comes to their income. Many families have been living on small budgets. They are at the limit of what they can sustain. They want to go back to the economy. They think it should be possible if adequate protection measures are implemented. Long transition periods might be wise from a public health point of view but have serious political costs. Governments must be clear when explaining the way the transition is expected to work. That is a task that requires top attention.

The complexity

In my part of the world, the debate is now moving towards the recovery issue. To be able to get back to normal life as soon as possible. People are worried about jobs and the economic impact of this astonishing crisis. It’s now clear that the new debt situation of the states, the firms and the families will reach gigantic proportions. Many will not be able to reimburse it. They fear poverty. In any case, the Gross Domestic Product will contract seriously, to dramatic levels if the lockdown goes on beyond mid-May. There will be a lot of pressure on governments in the next days and weeks for them to provide masks free of charge and to allow the economy to re-open. At the same time, people want to know that the hospital system is still able to respond and that enough money is invested in the vaccine research. All this will have a tremendous political cost. I can anticipate a lot of political malaise in some countries, particularly in France and Spain. That will add to the complexity of an extremely complicated crisis. 

The vision

In our part of the world, Easter time is about a renaissance. That’s a very appropriate moment to talk about the future. The public message must be inspired by prudent optimism. It´s good politics to describe the possible scenarios ahead of us. And give people more information about recovery plans. People appreciate being treated as adults, as responsible citizens. There is too much talk about the pandemic and not enough about the actions that will be supported during the recovery phase. Let’s move from fear to resilience. Leaders must share a vision that brings hope and shows to everyone they know what they intend to do, once the public health menace is under control. To narrate a vision will also help the leaders to sharpen their views on the policies that are required. A vision is not about wishful thinking. It is about what one sees as the situation after the crisis. It has a powerful positive effect on everyone, including on the leadership itself.

Optimism

It requires an enormous effort to be positive in today’s situation. We see the number of victims, we read the stories of their suffering, we watch the unemployment figures shooting to the stars, the immense level of poverty that goes along, we think of people we have known in Africa and elsewhere in the least developed economies, and wonder how can they survive on daily basis, we are told of perfectly viable companies going to the rocks, and all the rest, and we get depressed. But we must convince ourselves that sooner we will be able to contain the pandemic – to contain, as a first stage, before we eliminate it – and that normalcy will be invited back. We do not really know what type of normality that will be, people talk about a changed society, but as soon as people feel free to take care of their lives we might see a big leap forward, a renewed level of energy. I think we have here an opportunity to come out of it wiser. And that makes me feel a bit optimist.