How will the coronavirus affect the European Union?

The European Stability Mechanism will impact regional stability

Question: How will the coronavirus affect the European Union?
Position1 of 3›: Economic consequences
Argument‹3 of 3: The European Stability Mechanism will impact regional stability

The ESM was created after 2008 to provide loans to member states in financial crisis. However, the extremely high interest rates mean unless every state chooses to apply for these loans, interstate resentment will grow and destabilise Europe.

The argument

After the 2008 crisis, European nations wanted to put measures in place to guard against a similar disaster in the future. In response, the European Stability Mechanism was created. Now, world leaders are looking to the ESM to help Europe get back on its feet. In all likelihood, however, the ESM will fail to properly address their concerns. The difficulty lies in what the mechanism actually offers. The ESM will most likely be lending money to the countries that need it most — but a loan is not a transfer, and countries like Italy will still have to pay this money back. Thus, they may find themselves plunged into a severe debt crisis, having exchanged an immediate shortfall for a longer-term obligation they are no better placed to meet once the emergency has passed. Furthermore, the theoretical loans would likely either not impact the economy, or make it worse by bringing down the government that accepted the conditions attached to them. Thus, ESM's loans look like a bad idea on either outcome. The consequence is regional rather than national, which is what makes this a question of stability rather than of one country's finances. Countries will likely turn to the ESM to help them, because it is the instrument that exists and there is little else to turn to. However, the ESM will likely have to rethink its strategy. If not, its policies will have no effect, or perhaps even negative repercussions — and a rescue mechanism that destabilises the governments it lends to would leave the union weaker than before it acted. That is the last thing Europe needs after its period of lockdown.

Context

The global impact of the spread of the COVID-19 virus has heavily impacted the economies of all EU member states. The national lockdowns starting in mid-march have not only tested the crisis response of all EU member states but due to the unavailability of labour, the closure of most international borders and the crash of the stock markets, all national economies have been highly impacted.

Premises

[P1]The European Stability Mechanism is the primary mechanism EU countries are turning to for post-coronavirus economic recovery. [P2] ESM loans would burden already-vulnerable countries like Italy with repayment obligations that could trigger a severe debt crisis. [P3] Without rethinking its strategy, the ESM's interventions will either fail to help or actively worsen economic and political stability. [C] Therefore, the ESM's response to the coronavirus will negatively impact regional stability in the EU.

Counter-arguments

The article cited in the argument claims that the ESM's projected plan would be a misguided endeavor. However, its alternative also involves help from the ESM, just of a different kind. It is undeniable that however Europe improves in the coming year, ESM will play a key part in it. The exact nature of their aid is still up in the air, but with the right approach, the ESM will help suffering countries like Italy greatly.

Rejecting the premises

[P1]If a supranational debt is not equally distributed on member states, inequalities will not necessarily increase.

[P2]Regional stability is not mainly impacted by socio-economic factors.

Framing

Uneven debt distribution amongst EU member states will impact regional stability.