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The Covid-19 pandemic could not have started worse for the EU (Herszenhorn and Wheaton, 2020). In late February 2020, Italy requested supplies of medical equipment from other member states under the EU's crisis response programme, the Civil Protection Mechanism. The Commission duly escalated it to highest alert. But there was no response. Alarmed by Italy's request, France engaged in a stock-taking exercise that did not allow trading. Czechia, Germany, and Poland introduced export controls for medical equipment. Embarrassingly, China, Cuba and Russia came to the rescue more readily than fellow-Europeans (Poggioli, 2020). Under pressure from the Commission, German controls were lifted soon after (Reuters, 2020), but support for EU membership in Italy plummeted. The prospects for collective, forward-looking crisis management were bleak. Considerable policy resources had been spent since 2008 and their replenishment did not look promising. Some interventions, especially of the Troika, had done lasting political damage. A deepening political crisis seemed imminent, dividing an already divided union even further. Yet, over several months, the EU managed to agree on a massive support package for the anticipated long slow recovery. The breakthrough came in mid-July. This was not a Hamiltonian Moment, founding the fiscal union that some see as the panacea for all Euro Area (EA) woes (Kaletsky, 2020). But the flagship Recovery and Resilience Facility (RRF) recognizes that a preventive fiscal capacity is required to shield and support the EA's most vulnerable members. This is in stark contrast to the European Stability Mechanism (ESM), which handed out cheap rescue loans only once a government was shut out of bond markets, and imposed intrusive prescriptions for fiscal policy and institutional reforms, overseen by the Troika. The RRF adopts the principle that the promise of mutual support can prevent a panic before it spreads. This subsequently changed the political economy of Covid-19, although the public relations debacle of the Commission's vaccine procurement and the slow roll-out of the immunization programme in member states continued to test political unity. This article analyses what made the dynamic of the Covid-19 pandemic so different in political-economic terms. I look at this dynamic through the lens of three significant reforms, which were accompanied by a new crisis politics in which heads of state directly addressed sceptical audiences in other countries as well as their own. I provide evidence that the legacy of failure in the EA crisis spurred attempts by major protagonists to break with a path that they saw as politically disastrous for the EU polity as a whole. This should surprise any long-term observer of EU affairs. Ever since its revival in the late 1980s, the EU has enshrined long-term commitments of its members to openness and stability (Majone, 1996). The union operates in a rule-bound, path-dependent way that militates against such turnarounds. This scholarship is still valid and can actually explain why fiscal integration remains difficult even though a majority of member states has already given up their national currency. I propose a historical-institutionalist argument in the tradition of Pierson (2004) that can explain potentially path-breaking (or switching) reforms in the evolution of the experimental EU polity. The argument draws on literature on the possibility, and nature, of change in path-dependent institutional development (Streeck and Thelen, 2005; Capoccia and Kelemen, 2007). The reforms of 2020 can be seen as a critical juncture in a longer process, in which the EU transcends the confines of a regulatory polity but does not commit to fiscal federalism either (Genschel and Jachtenfuchs, 2014; Kriesi et al., 2021, pp. 4–6). The next section reviews how intergovernmental contestation over the legacy of the EA crisis led to a surprising political response to the Covid-19 pandemic. The subsequent section explains the innovations in the recovery packages agreed at the EU level. The last section outlines how we can understand path-breaking in the EU polity theoretically. After the inauspicious start, political actors tried to shape the public conversation about the pandemic. This conversation revolved, first, around crisis interpretation: is the crisis a shock from outside the EU or is past mismanagement to blame; does it affect all or primarily vulnerable Southern Europe members? The other debate concerned the appropriate economic response by the EU: how much additional support from the EU is needed to rekindle growth in member states? For answers, I look primarily at the public statements of five heads of state, using discourse as evidence for a political strategy of change (Schmidt, 2000). It was one of the notable features of pandemic politics that political leaders spoke directly to audiences across borders where they expected opposition. The selection of these five leaders reflects the focus of media reports on the EU's pandemic management. There are, first of all, the Prime Ministers of Italy, Guiseppe Conte, and of Spain, Pedro Sánchez, who started the conversation by calling for bold action to a pandemic that hit them first and hard. Mark Rutte, the Dutch Prime Minister, was their main opponent, representing at least three more member states (Austria, Denmark, Sweden). French President Emmanuel Macron (France) joined Italy and Spain in an initiative of nine countries calling for Eurobonds in late March and adopted the role of an interlocutor. The German Chancellor Angela Merkel kept a low profile until mid-May when she and Macron proposed a surprisingly big transfer scheme, providing an anchor for the grand bargain under the German Council Presidency in July. An early influential diagnosis can be gleaned from a transnational statement by Prime Minister Sánchez, after the first extraordinary European Council on 10 March, 2020. More clearly than the Council conclusions, Sánchez stressed the dual nature of the crisis: a global emergency with a health and an economic dimension (Sánchez, 2020). This proved to be consequential as it divided the pandemic into a fast-burning public health crisis and a slow-burning recovery crisis (Seabrooke and Tsingou, 2019). While member states and the Commission started to coordinate their public health responses from mid-March onwards, governments could afford some time to consider measures addressing the economic fallout (Truchlewski et al., 2021). Conte (2020a) seconded Sánchez a week later in an interview with the FT, stressing that this was a global, not a Southern European, emergency. An open letter to Council President Michel signed by nine member states 1 was based on this distinction but had a normative thrust: ‘we are all facing a symmetric external shock, for which no country bears responsibility, but whose negative consequences are endured by all’ (Wilmès et al., 2020). This letter, published on 25 March, would become notorious for its demand for a joint debt instrument (‘Coronabonds’). The signatories included Greece and Ireland, Luxembourg and Slovenia, which had in fact very different experiences of the pandemic. Hence, this letter was a call for solidarity, directed against the narrative of the EA crisis in which those countries that needed a bailout were blamed for past failings that justified onerous corrections. The interpretation ‘symmetric shock, external cause, affecting all’ was specifically directed against the Dutch government. In late March, Finance Minister Hoekstra scandalized Southern Europeans when he reportedly asked for an investigation into why Spain was fiscally not prepared for the pandemic (Euractiv, 2020). The Portuguese Prime Minister called his remarks ‘repugnant’. A dozen mayors of Italian cities posted a one-page letter as an advertisement in a conservative German newspaper on 31 March, which was widely circulated in Dutch social media. In this letter to ‘dear German friends’, the Dutch position is denounced as a prime ‘example of a lack of ethical standards and solidarity’. The Dutch government was accused of raiding other countries' tax bases to the detriment of the poorest (Calenda, 2020, my translation). Simultaneously, Conte gave extensive interviews in the Dutch newspaper De Telegraaf and the German weekly Die Zeit, stressing that the pandemic resembles a natural catastrophe and ‘Dutch citizens may need guarantees, too’ (Conte, 2020b; Google translation). Hoekstra was shamed into an apology. The symmetric character of the pandemic could be framed, however, as a reason for why nobody should make extraordinary demands on others. Three weeks before the July summit, Mark Rutte stated in an interview with an Italian weekly: ‘We owe solidarity to the countries most affected by the pandemic, knowing, however, that we too have been seriously affected. This means that states that need and deserve help must also ensure that in the future they are capable of dealing with such crises on their own in a resilient way.’ (Valentino, 2020, Google translation) This understanding of resilience made it into the name of the recovery fund and it stands for reform in return for grants. In her first public statement to prepare Germany's rotating Council Presidency, Merkel (2020) adopted a multi-faceted diagnosis. It distilled the agreeable essence out of the dissenting positions. The interview, simultaneously published on 20 June in six European newspapers, 2 started with what the Dutch-led coalition stressed: ‘time and again it has been shown that Europe is not yet sufficiently resistant to crises’. But she also highlighted the point Southern European leaders had made: ‘the coronavirus pandemic is confronting us with a challenge of unprecedented dimensions. It has struck us all indiscriminately’. And she expressed the shared fear of a populist backlash: ‘Very high unemployment in a country can become politically explosive and thereby increase the threat to democracy. For Europe to survive, its economy needs to survive.’ Merkel's speeches in 2020 expressed repeatedly the quintessential liberal concern that representative democracy depends on economic stability. Merkel did not hide Germany's interest in the integrity of the Single Market. The Coronabonds letter had stated this appeal to enlightened self-interest early on: ‘Preserving the functioning of the Single Market is essential to give all European citizens the best possible care and the strongest guarantee that there will be no shortage of any kind.’ (Wilmès et al., 2020) Border closures, the disruption of supply chains, and the uneven ability to benefit from the easing of state aid rules were in nobody's interest. The threat to mutually beneficial economic interdependence became the compromise diagnosis, to which all sides could sign up. The debate on what response should follow from the diagnosis was dominated by the question of what role the ESM should play. Governments changed their positions as lternativesto the ESM appeared. Coronabonds were countered with limited grant proposals. It took the ‘innovative’ financial design of the recovery fund to set a path to agreement. 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The three reforms fiscal integration for an experimental polity. 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The pandemic was also not to members. 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It was the of the EU this time that when Southern European countries were again to their by a their governments to the of the past the
Waltraud Schelkle (Wed,) studied this question.