One of the things we’ve seen this past year is the inefficiency – the sheer unfitness for duty – of the European Union economic management system. We can start with the PPE and ventilator system procurements – these managed to turn up less gear and later than that British method of just muddling through.
Then there’s the vaccine purchase. 300 million doses of the Sanofi vaccine, that’s OK, because the pre-purchase is the system of getting the vaccine made and tested. So no worries there. Except that’s not enough for 450 million people. So, a suggestion was made to buy some more of the Pfizer one, a suggestion rejected. Because that would be to be buying more German than French and that would never do. Except, of course, the Sanofi vaccine is delayed and might not be ready for rollout until this time next year.
The problem being that this insistence upon fairness, equity and national balancing means stuff just don;t get done. This is equally true of more strictly economic matters:
With Italy’s government on the brink for the umpteenth time and the country’s debt mountain rising, bond markets might normally be feeling a few jitters.
A row over how to spend billions of euros promised by the EU’s Recovery Fund is threatening to bring down Giuseppe Conte’s coalition government and plunge Italy into a fresh political crisis in the middle of a pandemic. But Italian bond yields – typically highly sensitive to turmoil in Rome – largely shrugged off the latest crisis to hit the eurozone’s problem child.
The Italian (and Greek, Portuguese) government is gasping for money right now. We’ve had something of an emergency this past year. So, the EU money is yet to arrive. Good timing, eh?
Sure, the UK and US have been splashing the cash wastefully. But it has all been spent already. Because that’s when it needed to be spent, in the emergency.
It’s also possible, necessary even, to ponder the very idea here. As and when this is all over we don;t face a demand deficit recession. It’s not a standard Keynesian problem to be solved by pouring more money in – the emergency is, incomes need to be supported, but afterwards isn’t. We face a recalculation problem. The world has changed, so must the economy, we’ve got to figure out how that new economy is going to work. This isn’t done by a few hundred people in Brussels doing so for 450 million people. This is something that can only be achieved by market processes – because that’s what market processes are, a continual testing of the universe of what can be done to see what works.
It’s not just that that cash is turning up late, it’s that it’s not even the correct solution.