Covid-19 and Federal Integration in the European Union

Abstract

While all political systems have struggled with the coronavirus pandemic, this paper examines the ways in which the pandemic has affected the European integration project, particularly with respect to a quasi-federal system with shared competences in key policy areas shaping an effective Covid-19 response.  Previous crises are associated with increased European integration, especially along the lines of ‘federal integration’ – a concept model for interpreting European integration as a dynamic policymaking process.  This paper suggests that this observed link between crises and federal integration is being replicated with respect to European governance of the Covid-19 pandemic in several areas, including agencification, fiscal policy, and health policy.    These new policy approaches and instruments have – as has been the case with previous crises – strengthened the European integration project.

 

 Introduction

The main purpose of this paper is to explore the extent to which we can observe a causal link between crises and federalism in the European integration project.  The first section explores the extent to which crises have precipitated European solutions to policy dilemmas.  The second section interrogates whether the Covid-19 pandemic has led to federal policymaking solutions as opposed to privileging national approaches.  The paper ends with some comments with respect to how our findings contribute to our understanding of the European Union (EU) as a federal system.

 

European Union Policymaking and Crisis

Is the EU suited to be a crisis manager? Schomaker, Hack and Mandy (2021) and Rhinard (2019) suggest the EU has important crisis capabilities.  Especially in recent years, the EU has created and developed a significant number of protection mechanisms and policy instruments of various kinds. Policy areas covered by these mechanisms and instruments, which have the broad aim of strengthening the EU’s crisis and emergency response, have included public health, civil protection, communications and information systems, disaster relief, and political crises.

With the completion of the internal market, EU member states have been unable to insulate themselves from crises experienced in other member states.  Recently, the EU has been expected to solve a succession of crises: the food safety crisis of the late 1990s; economic and financial crisis of 2010-14; the migration crisis of 2014-15; the crisis of rising euroscepticism across much of the EU from around 2009-10 (culminating in Brexit and the first ever withdrawal by a member state from EU membership); and, the legitimacy crisis, (which saw increasing populist and governmental authoritarianism in much of Central and Eastern Europe from 2010 onwards). Each new crisis triggers conjectures of the EU’s imminent demise.  Yet for Jean Monnet, one of the EU’s founders, and other proponents of European integration – particularly the European Commission – crises are welcomed because they often engender demands for European solutions from voters, opinion makers, and government leaders (Issing, 2020; Leigh, 2020).

The Covid-19 pandemic, however, is substantively different than these recent crises not only due to its global reach, but because it is the first crisis since the EU’s founding to have threatened human health throughout all EU member states.  So, too, the economic impact of Covid-19 has been devasting.  At the end of 2019 the EU was in its seventh year of economic expansion, unemployment was at its lowest in 20 years, and public debt was down.  By contrast, the EU’s GDP contracted by 6.6% in 2020 and the European Central Bank (ECB) estimated the general government budget deficit in the euro area to have increased by 7.2% GDP and projected general government debt to be 95% of GDP in 2023 – about 11 percentage points higher than before the Covid-19 crisis (European Central Bank, 2021).

The EU has been widely portrayed in the popular media as not having dealt well with the Covid-19 pandemic in respect of both the timings and the robustness of its policy responses, to the point that the very continuing existence of the EU has seemed to be brought into question (Leigh, 2020). Early member state responses (March and April 2020) to Covid-19 included imposing border controls, with some observers speculating that national governments were acting to block citizens of other EU member states access to physicians and hospitals (Herszenhorn, 2020).

Undoubtedly, member states took different approaches to the pandemic, some of these measures were specifically tailored to national circumstances and needs, as in Italy and Spain – the member states where the virus initially had the highest infection and hospitalization rates – with national lockdowns and tight restrictions on movements of people at an early stage.  By contrast with Italy and Spain, throughout the crisis Sweden, at least initially, took a much more relaxed and less restrictive approach. Taking the whole of the EU, most member states leant, though in something of a haphazard manner, towards the protectionist end of the protectionist/open borders spectrum, with several accusing each other of hoarding protective equipment and with many (eventually seventeen) imposing temporary border controls on movements from other member states.   EU member states have also taken different approaches with respect to lockdowns and the like.  But these differences can make sense in a far-flung federal system. Indeed, in the US, lockdown rules, mask wearing requirements, and even on who would be next in the queue for vaccinations, continues to be a state rather than a federal decision.

Variations in national approaches reflect the EU’s quasi-federal nature, but also the fact that it has had few social and health policy instruments available to it. To be sure, the Commission issued many communications to member states concerning advised courses of action on, for example, personal protective equipment (PPE), but its direct powers in management of health crises is weak. Indeed, the Commission has not even had the power to take decisions on the issue on which it was most criticised, namely the slow and insufficient purchase of vaccines. Rather, the Advanced Purchasing Agreements (APAs) taken under the EU Vaccines Strategy (European Commission, 2020) (agreed by the European Council in June 2020), have been the responsibility of a Joint Negotiating Team, comprised both of member state and Commission representatives.  Under this process, the member states would each tell the Commission how much of a certain vaccine they would want to order and they would then be responsible for purchasing, paying for and delivering the vaccines as and when they became available. Though it has had to ensure that the distribution of vaccines between member states is fair and equitable, and on a pro rata basis, the Commission was subsequently widely criticised for supply and delivery problems, partly because it was authorised to sign contracts for portions of collectively procured vaccines (although member states also could and did procure vaccines on their own).

In conclusion, as an organizational entity, the EU has historically meandered between various and changing forms of intergovernmentalism and decentralisation on the one hand and federalization/supranationalism and centralisation on the other. With respect to the latter, various descriptions have been used as to what form the centralisation takes – with, for example, some observers arguing it is sui generis -‘an unidentified political object’ in former Commission President José Manuel  Barroso’s  words  (EUXTV-The Europe Channel, 2007), while we argue the EU is more likely a quasi-federal system or perhaps even a federal system ‘in the making’ (see Buonanno and Nugent, 2021, especially Chapters 2 and 3).  We see European integration as a dynamic process we call ‘federal integration’, which takes account of the economic logic of integration but also includes political, and more especially federal dimensions of policy development.  While a key characteristic of federal systems is their constant evolution as power shifts between federal government and subnational units, generally power shifts in a centralizing direction (Burgess, 2004; Friedrich, 1968).  One of the triggers of centralization is crisis. While the extent that crises herald major turning points for the EU has been much-debated, undoubtedly EU policy competences in several policy areas have shifted toward increased integration as a response to solving several of these EU-wide crises.  There are several such examples of the federalizing direction of EU policymaking during and following a crisis. Following European food crises in the mid-to-late 1990s, the EU established the European Food Safety Authority (EFSA) as an independent risk assessment agency with a remit including food and feed safety, nutrition, and animal health and welfare.  Indeed, Greer et al. (2019) suggest, ‘The big steps in EU public health policy do seem to follow threats, in particular with BSE and the creation of the health DG and then the increased number of communicable disease crises and the creation of the ECDC’  (European Centre for Disease Prevention and Control).

The Common Foreign and Security Policy (CFSP) and the Common Security and Defence Policy (CSDP) were developed in response to the EU’s inability to act effectively in the Balkan conflicts of the 1990s.  The Area of Freedom, Security and Justice (AFSJ) was broadened and strengthened due both to terrorist attacks in EU member states and the 2015 migration crisis.  Agencification has increased significantly as a result of these two crises, not only with the establishment of the Justice and Home Affairs (JHA) agencies, particularly Europol (crime fighting), Frontex (border control), and the European Asylum Support Office (EASO), but EU’s consistent strengthening of  their remit:  Europol and the European arrest warrant, counterterrorism task force, Frontex becoming the European Coast Guard and Border Agency (ECGBA), the EASO was strengthened into the EU Agency for Asylum (EAA) in mid-2021, and “hotspots” established in Italy and Greece where Frontex and EASO officials work alongside national border officials in administering the EU’s Common European Asylum System (CEAS).  Brexit has opened a policy window for France and Germany – with the Franco-German motor leading the EU decisively into a ‘permanent enhanced structural cooperation’ PESCO arrangement, which has the potential for EU member states to build an effective European defence capability outside of the NATO architecture.

With respect to what has been arguably the major crisis threatening the European integration project, the eurozone and sovereign debt crises precipitated by the Great Recession of 2008, Kenneth Rogoff, former IMF chief economist and a scholar of debt crises and panics, observed in late November 2011 (during the eurozone crisis), ‘The Europeans hoped to have 30 to 40 years to integrate more fully.  Right now, they don’t have 30 to 40 weeks’ (quoted in Erlanger, 2011).  Remarkably, the EU retooled Economic and Monetary Union (EMU) between 2011 and 2013, emerging with a banking union, a permanent rescue (bailout) fund; and binding rules for fiscal discipline. So, too, the EU now has in place institutional, monetary, and fiscal reforms that just did not exist prior to the eurozone crisis, making it more likely the euro area can weather the economic fallout from the coronavirus pandemic.  One example of a post-reform EMU better able to withstand fiscal crises is the ECB’s ability to launch the Pandemic Emergency Programme with an envelope of €750 billion to purchase public and private sector securities to ‘counter the serious risks to monetary policy transmission mechanism and the outlook for the euro area by the outbreak and escalating diffusion of the coronavirus’ (European Central Bank, 2020).

 

Federal Integration and Covid-19

Can we detect more European solutions to policy dilemmas since the outbreak of the Covid-19 pandemic in March 2020?  There are several indications that this is the case.

First, with the decision of the ECB to drop its previous opposition to purchasing government bonds issued by the member states, we may not be seeing a ‘Hamiltonian’ moment proponents of a European fiscal union would prefer, but it is a momentous step if one views it in the context of fierce resistance to the ECB doing so during the eurozone crisis.

A second significant policy development (albeit one that has also been accompanied by sharp internal divisions) was the agreement on the 2021-27 Multiannual Financial Framework (MFF), which the European Council greatly increased in size and broadened into the Next Generation EU (NGEU) – an EU-based pandemic recovery fund – with a stimulus package totalling €750 billion.  The post-pandemic MFF is a small step – but a step nonetheless – towards fiscal union because: 1) recovery funds have nearly doubled the size of the EU’s MFF;  2) the NGEU fund is financed by the Commission’s issuance of ‘eurobonds’ on capital markets collateralized by the EU’s budget; 3)  much of the new funding is in the form of grants and not loans; 4) over 50% of this funding is earmarked for modernisation in several policy areas that previously had been mainly managed by member states, including digitisation and the environment, and 5) the need to fund the NGEU was accompanied by the member states agreeing to new EU-based revenue sources so as to reduce the heavy dependence on the GNI source (which is an intergovernmental rather than federal approach to financing EU operations and programmes).

Third, the coronavirus pandemic has been accompanied by institutional developments. The Commission waged a successful campaign to persuade member states to agree joint procurement of personal protective equipment and refrain from banning their export to other EU member states.   And while the European Medicines Agency (EMA) was one of the early EU agencies (authorized in 1995 to streamline the process of approval for ethical drugs, rather than them having to be approved by the appropriate regulatory authority in each member state), it has played a central role during the Covid-19 pandemic and has resulted in both Europeans and non-Europeans now being made aware – which many had not been – of the Europeanisation of drug and vaccine approval. Moreover, and notwithstanding accusations that it has sometimes been too slow to act, the EMA has, for the most part, performed generally well (at the time of this writing, the EU has authorized four vaccines and is conducting rolling reviews of others – see EMA, 2021). Indeed, member state national public health authorities have become increasingly tightly networked with each other and to the Commission – specifically its comitology committees and information/regulatory agencies such as the EMA, the ECDC, and the EFSA. The fact is that the EU member states have (with some ambiguity on this point with respect to Hungary under President Orban – see Zalan, 2021) accepted the role of the EMA as the regulatory agency that approves vaccines.  While this does not mean that national leaders will not sometimes question the speed and efficacy of the EMA (as with some accusations of ‘foot dragging’ in reviewing vaccine trials for Russia’s Sputnik V), it does mean that the EMA is on par with the US Food and Drug Administration (FDA) in this respect.  The ECDC has also been granted more authority during the Covid-19 pandemic.  Therefore, in both cases we see how a crisis has led to an increase in the centrality of administrative agencies, with agencification being a key feature of US federalism and increasingly in the EU as well.

A fourth indication of a federal direction is public opinion. Eurobarometer polls have consistently reported results that support a federal conception among European citizens in attitudes toward preferred policy roles of Brussels and national levels in key policy areas (Buonanno & Nugent, 2021, p. 325) and we are seeing similar trends during the Covid-19 pandemic, with over 67% of respondents agreeing the EU ‘should have more competences to deal with crises like the Coronavirus epidemic’ (European Parliament, 2020).

And finally, turning to EU health policy, some health policy scholars have suggested a federalist/neofunctionalist approach for improving health care in Europe (see, for example, Greer, 2006; Vollaard et al., 2016) and have continued to apply this conceptual approach during the Covid-19 pandemic (Brooks et al., 2020).  Yet, the limited responsibilities for the EU in respect of public health is made clear in the TFEU Article 168 (protection of public health being mainly a member state responsibility, with the EU taking a coordinating role and undertaking financial support).   This historic stance changed with Covid-19 when in May 2020 the Commission proposed a new and greatly expanded EU health programme, which was adopted by the Council and EP in March 2021. EU4 Health, as it is called, is the EU’s largest-ever spending programme on public health and has the interrelated ambitious aims to improve and foster health in the Union, protect people in the Union from serious cross-border threats to health, enhance the availability and accessibility of medicine products, and strengthen national health systems (European Commission, 2021b).  Indeed, in September 2021 the Commission launched a ‘health union’ with a stand-alone agency – the European Health Emergency Preparedness and Response Authority (HERA) – which will stockpile and distribute medical supplies (HERA, 2021c).

 

Concluding Comments

How do these findings contribute to our understanding of the EU as a federal political system? The Covid-19 crisis has done much to propel the EU in an increasingly federal union direction, notably via the financing instrument for the NGEU;  the newly launched, and now to be EU-funded, EU4Health Programme and the Commission’s establishment of HERA; the Commission’s announcement that, in the wake of the larger MFF, it has revived a dormant proposal, first tabled in 2011, the Common Consolidated Corporate Tax Base (European Commission, 2021a), which now seems to be viewed more  favourably among many member states as a mechanism for raising funds to revive a post-pandemic European economy;  the central role the EMA has played in approving Covid-19 vaccines; and, a majority of European citizens expressing support for European institutions to take a greater role in improving and protecting public health.

 

Buonanno, L. and Nugent, N. 2021. ‘Covid-19 and Federal Integration in the European Union’, 50 Shades of Federalism. 

 

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Acknowledgments

The authors would like to express their gratitude for comments provided by the editors. Naturally, the authors take full responsibility for any errors.