Will 2021 be the year in which Europe finally learns to stand on its own two feet and find the strength and maturity to tackle its internal and foreign policy challenges? Before we embark on an answer, it is worth establishing one clear fact: 2021 will still be the year of the pandemic, both in Europe and worldwide. While we can hope that a vaccine might quell the health emergency, it will certainly not wipe out the devastating social and economic repercussions of Covid-19.
So let’s start with the economy. Traditionally, when we want an idea of how the economy might fare in the year ahead, we turn to economic forecasts: these, according to the European Commission, point to growth of 4.2% for the EU as a whole (on the heels, however, of a 7.4% nosedive in 2020). But if there is one thing we have learned from 2020, it is that forecasts in current conditions have a high degree of uncertainty, to say the least. Nothing shows this more clearly than the continuous, substantial, downward revisions that were made over the past year, as it became clear that the first wave of infections would inevitably be followed by (at least) a second. While it is fair to assume that the vaccine will reduce the likelihood of full lockdowns, the economic consequences of the pandemic will not simply disappear. And this applies first and foremost to public debt, which has skyrocketed all over Europe and worldwide. Now approaching the dizzying height of 160% of GDP, Italy’s public debt is definitely worrying, but even France’s is now over 115%; not to mention Germany, which has had to sacrifice its sacred commitment to 60% on the altar of Covid. The idea of re-establishing the (suspended) rules of the Stability and Growth Pact is not currently an option. Left to its own devices, Europe’s debt mountain might even be sustainable, but it is hard to imagine it remaining so in the face of a new ‘black swan’ event, such as a global financial crisis. The mountains of debt are rising ever higher worldwide, and the peaks reached by other advanced economies are not the only cause for concern, as those reached by the poorest countries and, more especially, developing countries, are even more worrying. Averting the danger of a new financial crisis, regardless of its origin, is a high priority for Europe and for the world as a whole. On this front, in fact, efforts can only be global. And it is right to remember that the G20 took successful concerted action in the last financial crisis. But it acted ex post. This time, it needs to act ex ante. There is no doubt that the ‘Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI)’ of 2020 was an achievement. But nonetheless, it offers very little for the poorest countries and almost nothing for all the rest. Under Donald Trump, the USA strangled any meaningful initiatives of this type at birth, starting with the IMF’s Special Drawing Rights (out of fear that China might also benefit from them). The EU should do all it can to make Joe Biden an ally on this issue.
Internally, however, the EU has already achieved something, by approving reform of the ESM (having overcome Italy’s astonishing veto). This will shore up the defences against external shocks, but only up to a certain point. The ability to resist external shocks is inextricably linked with the ability to generate new growth; and from this point of view, the EU’s enormous change of pace in 2020, especially through the Recovery Fund, deserves full recognition. We trust that this change of pace will continue into 2021, with the rapid disbursement and effective use of the substantial funds involved. This will play a vital role in mitigating the political and social effects of the pandemic, which could become even more acute in 2021 than they were last year. Any shortcoming on this front would undoubtedly compromise the EU’s return to credibility (after years of deadlock). What’s more, 2021 will be a major election year. Portugal and the Netherlands will be important test benches, but most eyes are firmly fixed on the possible shape of a post-Merkel Germany. Alternative für Detuschland seems to be lagging behind at the moment, but is no doubt waiting in the wings, ready to take the stage at the first sign of economic or social stress. The most worrying factor is that any government alliance that emerges after the vote could be fragile. Let’s hope that such a scenario does not materialise, because while Germany was crucial to Europe’s change of pace in 2020, it will be even more crucial in 2021, when the EU will need to lay the foundations for recovery and prevent unemployment rates of over 10% in various EU member states from translating into discontent and renewed Euroscepticism, which could then be vented in the streets and at the ballot box.
But to show that it really can stand on its own two feet, the EU also needs to be more assertive in its foreign policy and international standing. Here, the situation is even more complicated than on the economic front, where at least the EU has much clearer and more finely tuned competences and mechanisms at its disposal. The EU has definitely become more aware of this need in recent years, however, and its most senior figures, starting with President von der Leyen and her commitment to a ‘geopolitical Europe’, have shown a willingness to stake out their positions. This same awareness can also be found among citizens. According to the latest Eurobarometer, 87% of Europeans support the view that Europe should act more independently from third countries in addressing the challenges posed by the crisis. This is a clarion call for the EU to stand on its own two feet. But it is also a call that sets expectations so high that they could easily lead to disappointment. Much of the responsibility for fulfilling these expectations in practice lies with the EU. This is certainly the case with cooperation in common security and defence, which cannot be confined to PESCO and little else. But it is especially applicable to migration, in view of the possibility of a further increase in migrant inflows into the Mediterranean region in 2021. Some progress has been made (especially in terms of resources), but we are still a long way from fulfilling the ambition of establishing a real common European border. In many other cases, these responsibilities will need to be translated into a more practical approach to relations with the rest of the world. This is certainly needed, not only with Putin’s Russia, but also with the USA and China. As far as the United States is concerned, 2021 will mark a year of only partial ‘reconciliation’ in the wake of the Trump era, because the fault-lines between the two sides of the Atlantic are only partly attributable to the excesses of Donald Trump. Some fields, such as public health and the environment, will offer more scope for ambition, whereas others will require pragmatism and a willingness to understand what can and cannot be expected from the new American administration. International trade falls firmly into the latter category. By teaming up with other international allies (including even China), the EU could press for a US ‘re-engagement’ with the WTO that might at least unlock the impasse in which the organisation is mired. As for bilateral trade relations, there seems to be little hope of reviving the TTIP (as Ursula von der Leyen rightly maintains). It will be necessary, however, to open negotiations on the tariffs introduced by Donald Trump (which Joe Biden is unlikely to be able or willing to eliminate completely) and on other thorny issues such as state aid, the regulation of cyberspace and taxing the web giants. The same practical commitment should also emerge in the opening of new negotiations with Iran on the JCPOA and in relations with Moscow. As for China, Europe’s disappointment (and primarily Germany’s disappointment) with the recent failure of negotiations on investments could be a key issue in 2021. China’s short-sightedness in this respect did more damage than internal divisions within the EU, because it blinded Beijing to the unique opportunity to forge closer ties with Europe, at a time when the latter was growing further apart from Donald Trump’s America. It is only in the past few days that the Chinese seem to have recognised their mistake and reopened negotiations, with significant concessions on mutual investment and market access. However, European criticism of China’s human rights and workers’ rights record will continue to take its toll.
To sum up, Europe will kick off 2021 with a range of old and new challenges in its in-tray, which should be addressed with a stronger sense of shared international responsibility in some of its member states, as in the case of Italy’s Presidency of the G20 and the joint Italian and British presidency of COP26 (so yes, the UK, who will also chair the G7, is still involved despite Brexit). The EU will not be able to stand entirely on its own two feet in 2021. But at least the past year has given those feet a tough enough workout to enable them to risk taking a few steps forward – in the hope, of course, that another black swan event will not throw obstacles in the way.