by Rocco Steffenoni
Nations and communities have never been sufficiently equipped, from a scientific and cognitive perspective, to address crises: whether economic or pandemic. As Lucretius put it, while describing the gloomy Athenian plague in 430 BC, «Nec ratio remedii communis certa dabatur» the lack of any sure fit for all strategies emerges in all its essence during a pandemic crisis.1 This is where institutions shall step in: in the market to provide institutional and economic guarantees, in societies to balance the powers and prevent unorderly solutions.
It is no surprise that, since the outbreak of the Covid-19 pandemic, it is taking a lot of political effort across the Union to embrace effective solidarity, as enshrined in Articles 2, 3 and 21 of the Treaty on European Union (TEU) in the form of both a common value and an obligation among Member States.
In this respect, the pandemic crisis represents a solidarity test and a misfortune opportunity to evaluate the current risk of fragmentation at the EU and domestic level. In the context of healthcare, while common safety concerns in public health matters is a shared competence among the Member States and the Union, the provision of healthcare is a national competence, which is then often bestowed upon the domestic regional level with a wide array of implementation options depending on the chosen institutional set-up.
In relation to this, a recent resolution of the EU Parliament has blatantly remarked that “the EU response to the COVID-19 pandemic has so far been marked by a lack of coordination between Member States in terms of public health measures, including restrictions on the movement of people within and across borders and the suspension of other rights and laws”.2 It is, however, part of the history of the EU that it is mostly due to critical events which the European Project has moved forward. It is, therefore, the case during this pandemic crisis to stand in support of completing a fully-fledged Fiscal Union for the Eurozone.
Speaking of Italy, similar critiques regarding fragmentation could be raised in respect of the apparent lack of coordination among the central government and regional level in addressing the health crisis in northern Italy. After the 2001 constitutional reform, Italy went indeed for a quasi-federalist model whereby healthcare is a shared competence. As far as public health is concerned, in theory, the Italian Constitution provides for a national interest clause (Article 120(2)), but so far, the central government has been reluctant to invoke it during the Covid-19 crisis.3 The Italian government rather went for a mild option – Article 3 of the 25th of March 2020 Legislative Decree No. 19 concedes that regions may take more stringent measures in case of supervening circumstances to a government level measure.
Against this background, the pandemic crisis in Italy has seemingly resolved in exacerbating such a scattered and still unpolished multilevel institutional framework. Additionally, as far as the solutions to overcome the economic and social consequences are concerned, the overall discussion in Italy revolves around the fiscal policy discourse. It is common knowledge in Italy that due to the high public debt the country is exposed to a reduced leeway in terms of fiscal capacity to tackle the health and economic crises. This broad topic is also part of a recurring set of vexed questions on limited sovereignty in the current Italian politics.
In this regard, after having acknowledged that “the main fiscal response to the Coronavirus will come from Member States’ national budgets”,4 the European Commission endorsed the activation (for the first time and for all the concerned Member States) of the general escape clause of the Stability and Growth Pact on budgetary requirements during severe economic downturns, which – it shall be stressed –does not entail suspending such procedures as a whole.5
In particular, the suspension dwells both on the preventive and corrective arms of the Stability and Growth Pact. On the former, it allows the temporary departure from the adjustment path towards the medium-term budgetary objective to the extent that “this does not endanger fiscal sustainability in the medium term”.6 On the latter, it involves the Council to decide, on a recommendation from the Commission, to adopt a revised fiscal trajectory.7
Besides, Member States have also been enjoying the State Aid Temporary Framework,8 which for Italy was allegedly communicated with a budget of up to 200bn,9 as well as the recent temporary measures laid down by the ECB until September 2021 via the Pandemic Emergency Purchase Programme (PEPP), which also involves the pivotal ease of collateral standards and the increase of asset eligibility below current minimum credit quality requirements. Further, in a historical revirement, the Eurogroup agreed on 9 April 2020 that euro area Member States that request the European Stability Mechanism (ESM) support would have, in terms of conditionality to access the credit line, the only requirement of committing “to use this credit line to support domestic financing of direct and indirect healthcare, cure and prevention related costs due to the COVID 19 crisis”.10 This would mean that for Member States, that do not comply with some of the eligibility criteria (mostly, budgetary), no obligation to adopt corrective measures would come as a conditionality for accessing the credit line, which otherwise would take the form of the Enhanced Conditions Credit Line (ECCL) for a country like Italy.
On top of that, as part of the outcome of the European Council meeting on 23 April 2020, Member States endorsed the conclusions of the aforementioned Eurogroup meeting setting out a “Joint Roadmap for Recovery”, where a preliminary agreement on the relevance of the Recovery Fund has been found, despite being still blurred in its contents due to the current early stage of the discussions. Nonetheless, in the conclusions of the meeting, the President of the European Council posited that the Recovery Fund “shall be of sufficient magnitude, targeted towards the sectors and geographical parts of Europe most affected, and be dedicated to dealing with this unprecedented crisis”.11 The heavy burden is hence on the European Commission’s shoulders, which has been bestowed with the task of analysing the exact needs and urgently coming up with a commensurate proposal in relation to such an unprecedented crisis which shall be in link with the EU budget (MFF).
As per today, the Recovery Fund looks like a rebranding compromise between the dovish and hawkish attitudes among Member States towards the future of the Union, while leaving aside the more audacious project on the issuance for the sole euro area Member States of bonds under joint and several liability (Eurobonds).12 As it is well-known, the latter could have possibly led to a European Minister of Economy and Finance within a Fiscal Union, as suggested by President Juncker during the State of the Union Address in 2017.13 Instead, by adopting a rather low-key approach to this issue, the details of the Recovery Fund will reasonably remain under fierce political discussion until the expected next European Council meeting in June 2020.
While the above still remains unsettled to an extent, at least in relation to the political will of taking a step forward in the European Project for a Fiscal Union, fragmentation and lack of coordination seem to be the most recurrent scenario for the time being. This utmost affects solidarity (and its social perception) which is still not a given. As a result, what seems to be missing is a Treaty level procedure based on the community method to address symmetrical and exogenous shocks – like Covid-19 – while ensuring that solidarity among Member States can be taken for granted on the sole basis of the EU membership and not relegated to the hurdles of Council negotiation.
- The full reference is “Nec ratio remedii communis certa dabatur; nam quod ali dederat vitalis aëris auras volvere in ore licere et caeli templa tueri, hoc aliis erat exitio letumque parabat”, Lucrezio, De rerum natura, VI, 1225-1229; M. R. Gale, Oxford Readings in Lucretius, OUP, 196-198.
- European Parliament, Resolution of 17 April 2020 on EU coordinated action to combat the COVID-19 pandemic and its consequences, 2020/2616(RSP), P9_TA-PROV(2020)0054 (Provisional edition), 17 April 2020.
- Among other reasons, the procedure to activate Article 120(2) of the Constitution, as set out in Article 8 of Law 5 June 2003 No. 131, would not be very rapid, although an interim procedure on the basis of urgency is provided under Article 8(4).
- European Commission, COVID-19: Commission sets out European coordinated response to counter the economic impact of the Coronavirus, 13 March 2020.
- European Commission, Communication from the commission to the council on the activation of the general escape clause of the Stability and Growth Pact, COM(2020) 123 final, 20 March 2020. Accordingly, on 23 March 2020, Ecofin agreed that “The general escape clause will allow the Commission and the Council to undertake the necessary policy coordination measures within the framework of the Stability and Growth Pact, while departing from the budgetary requirements that would normally apply, in order to tackle the economic consequences of the pandemic”.
- Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97.
- Articles 3(5) and 5(2) of Regulation (EC) 1467/97.
- European Commission, Communication from the Commission Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, 2020/C 91 I/01, 20 March 2020. Later amended on 3 April 2020.
- European Commission, State aid: Commission approves Italian guarantee scheme to support the economy in coronavirus outbreak, 14 April 2020.
- Eurogroup, Report on the comprehensive economic policy response to the COVID-19 pandemic, 9 April 2020. It shall also be noticed that the ECB clarified that “A necessary condition for Outright Monetary Transactions is strict and effective conditionality attached [to ESM… which] can take the form of a full EFSF/ESM macroeconomic adjustment programme or a precautionary programme (Enhanced Conditions Credit Line), provided that they include the possibility of EFSF/ESM primary market purchases”, ECB, Technical features of Outright Monetary Transactions, 6 September 2012.
- European Council, Conclusions of the President of the European Council following the video conference of the members of the European Council, 23 April 2020.
- On the importance for the EU of having different strategies to cope with the crisis, see A. Agnès Bénassy-Quéré, et al, COVID-19 economic crisis: Europe needs more than one instrument, VoxEU.org, 21 March 2020.
- “The new Minister should coordinate all EU financial instruments that can be deployed if a Member State is in a recession or hit by a fundamental crisis”, President Jean-Claude Juncker’s State of the Union Address, 13 September 2017.
Rocco Steffenoni is a PhD Candidate in International Law and Economics at Bocconi University, where he is currently focussing on administrative law and European law with regard to intergovernmental financial relations in Italy. He is a teaching assistant within the course of Global Administrative Law at Bocconi and a research assistant in International Financial Law and Financial Regulation at the London School of Economics and Political Science (LSE). He graduated from Università degli Studi di Milano. He holds an LLM in Corporate and Commercial Law at LSE. Rocco is a qualified lawyer registered at the Rome Bar.