As a reaction to COVID-19, governments are making extensive financial aid available. However, beyond helping out households and companies in need, aid also attracts opportunists. Because of this, the OSCE is expecting corruption to increase. Yet, this danger differs across countries, even within Europe, where corruption is less problematic than in other regions. In Scandinavian countries, corruption within the civil service affects people’s lives very mildly. In some countries of Eastern and Southern Europe, the situation is more complex but not hopeless, as shown by recent encouraging developments in a number of countries, e.g. Estonia.
Last month, after a long exhausting discussion, the European countries reached an agreement on the European Union’s budget, and especially on the Recovery Fund. This latter includes around €312 billion of grants for Member States and €360 billion of loans.
After many days of fierce bargaining, the EU political leaders have eventually achieved an agreement about the magnitude of the stimulus package deemed necessary to restore sound conditions for the European economy. The deal was expected. A fiasco would have badly shaken financial markets (with consequences) and raised further doubts about the ability of the current political establishment to steer the ship through stormy seas. The € 750 billion recovery package to soften the Covid-19 crisis will be particularly welcome by the Eastern and Southern European countries, as emphasized by the European Commission in its Staff Working Document, Identifying Europe’s recovery needs . Besides, it has also been agreed to widen the 2021-2027 EU budget, up to € 1,074 billion. In other words, the EU’s next seven year budget and the Next Generation EU programme (the so-called recovery plan) will provide a total package of € 1,824 billion.
There are situations in which people are all but obliged to act differently from what they preach. The latest example was provided the president of the European Central Bank (ECB) Christine Lagarde. In mid-March, she declared that the European Central Bank «is not here to close spreads». By saying so, she wanted to emphasise that helping a member State to sell its bonds on the market is not the ECB’s job, and that no exceptions are admitted.
The economic consequences of Covid-19 will be heavy: a significant portion of production came to a halt for weeks, and international value chains were disrupted. Governments will increase expenditure massively in order to hand out subsidies and respond to unemployment, while tax revenues will decline. The upshot is that budget deficits will grow, and so will public indebtedness. The European Central Bank (ECB) will make it possible by buying government bonds (govies) and injecting new liquidity, with which commercial banks will also buy (more or less) risky govies, hoping to sell them to the ECB. But a great deal of incremental debt will not be AAA-rated, so portfolio risks follow. The need for increasing the supply of low-risk bond (see Lagarde in 2019) has therefore intensified (see here and here).
The next elections to the German Bundestag have been moved up to autumn 2021. At that moment, Angela Merkel will have served as chancellor for 16 years. As opposed to Helmut Kohl in the 1990s, she does not seek re-election. Nevertheless, her tenure – which has been extraordinarily long for a head of government in a Western democracy – justifies some thoughts about the pros and cons of changing political leaders at regular intervals.
The literature has put forward two main arguments to explain the recent rise of populist parties and their electoral success. On the one hand, commentators have highlighted the rising level of uncertainty about the economy and grievances among the losers in global markets. Resentment, it is argued, has been susceptible to the anti-establishment message of populist movements and parties that blames ‘Them’ for taking away from “Us” prosperity, job opportunities, and public services from ‘Us’. On the other hand, authors have emphasised the role of culture and the backlash against long-term shifts in progressive and liberal social values. Such cultural backlash is especially strong among the older generation and less educated people, who suffer the displacement of familiar traditional norms and the rapid cultural changes that seem to be eroding the basic values and customs of Western societies. Other external shocks – such as the massive recent increase in immigration – are related to both explanations. Immigrants ‘compete’ against native low-wage, unskilled workers, and at the same time bring with them new values and behaviours that may be source of tensions with the residents in the destination countries.
Cost-benefit analysis is far from being a perfect tool. In particular, the subjective nature of costs and benefits makes all calculations arbitrary. Thus, it may happen that policymakers take bad decisions even when applying the best methodology. Yet, the world of politics requires that decisions be taken, and I believe that cost benefits analysis can still be helpful (and better than groping).
In May 2018, Giuseppe Conte became prime minister after an electoral campaign in which Italians were being told that a honey and milk Age was about to begin. It was clear to everybody that an unknown professor of Law, with no political legitimacy (he had not figured prominently in the electoral campaign and was not among the candidates for parliament), could easily top the list of the weakest Prime Ministers in the Italian post-war political history. Indeed, the real power was in the hands of the two ubiquitous vice prime ministers, Matteo Salvini (League) and Luigi Di Maio (5- Star Movement, 5SM). In fact, Di Maio and Salvini were so influential that many commentators considered the Conte cabinet as an original experiment in vice-presidentialism, a system of government you can hardly find in any political science or constitutional law textbook.