Subscriber OnlyOpinion

Michael McDowell: EU might have disintegrated if it failed to agree post-Covid stimulus deal

Deal does not determine whether federalists or realists have gained the upper hand

There are three principal ways of looking at the European Union project. Eurosceptics reject the EU in its entirety. Euro-federalists imagine that it is inevitably developing into a federal, sovereign superstate – the so-called “good empire” advocated by Belgian MEP Guy Verhofstadt. Euro-realists see the EU remaining a partnership of individual member states with limited pooling of sovereignty and competences.

The deal done in Brussels over the past five days does not determine whether the federalists or the realists have gained the upper hand. In truth, the budgetary process for 2021-2027 was always going to be difficult – with or without the Covid-19 crisis.

But the protracted and difficult negotiations between the “frugal”, northern states and the more integrationist Old European states actually masks a number of quite different lines of cleavage between north and south and between east and west. The deal required physical presence; it could never have been done by a virtual summit.

Some are arguing that every member state had to compromise and that there were no clear winners. By diluting their outright opposition to EU collective borrowing, the “frugal” club secured a blended recovery stimulus package of €360 billion in repayable loans and €390 billion in grants to weaker economies. The “frugals” also secured increased budgetary rebates for themselves, echoing Margaret Thatcher’s rebate.



There was a monstrous fudge on how the €750 billion EU borrowing will ultimately be repaid. Vague new tax and levy initiatives have been outlined. Each member state has been afforded an emergency brake on aid to other non-reforming member states. The proposals for EU financial transaction taxes and digital taxes will be challenging for Ireland. You wouldn’t have had to be overly cynical to see the European Commission’s rumblings about circumventing tax unanimity on the day before the Apple judgment as a piece of retaliatory rhetoric based of a leak of what the EU General Court was about to do the following day.

Other commentators see Poland and Hungary as winners having beaten off attempts to link EU aid to “rule of law” and democracy conditions. Poland also avoided committing to 2050 climate targets.

I put myself firmly in the Euro-realist camp. If the EU had failed to use its collective economic strength to create a collective post-pandemic stimulus package, the union itself might have disintegrated.

On the other hand, if Brussels had become the recipient of an autonomous, massive borrowing and grant-dispensing competence in the order of €750 billion, it would have emerged as a European government in all but name.

There had to be a deal; there had to be a compromise. And the old faithful political lubricant, constructive ambiguity, has had to be poured over the stimulus mechanism to let it appear to be functional.

Prevailing record-low interest rates were also an essential precondition for agreeing the deal. If international monetary easing had spiked inflation and rising interest rates, the economic cost of the stimulus package would have sunk it.

The deal was a clear-minded collective exercise in survival rather than a high-minded collective exercise in integration.

Brexit is a very major problem for us – a problem that must be resolved in the next five months

Ireland has avoided taking sides between the so-called Hanseatic League with which we have a lot of interests in common and the Paris-Berlin axis over which we have a good reason to be cautious. Reduced agricultural expenditure will not be welcome here.


But we have far bigger fish to fry. In particular, Brexit is a very major problem for us – a problem that must be resolved in the next five months.

We have a vital national interest in the softest possible Brexit deal. The Brexiteers in London are faced with their own very serious problems. Their claim that a hard Brexit would enable the UK to conclude massive international trade deals that would stimulate the British economy is looking a wee bit optimistic in the context of a worldwide post-pandemic recession or perhaps depression.

One gets the impression that the Brexit project, like Boris Johnson himself, is somewhat deflated and suffering from reduced energy. From the man who is credited with the “f*** business” remark during the referendum campaign, there seems to be just a little apprehension that his remark might turn out to be less an exclamation of momentary frustration and more of a prophecy.

Donald Trump’s support for the UK Brexiteers may disappear on November 3rd. Would a Joe Biden administration back a buccaneering Britain against a strengthening EU? Would a more multilateral US foreign and economic policy favour a hardline British post-Brexit relationship with the EU?

We may have reason to be optimistic. The hardline Brexit hawks in Westminster may just be realising that Trump-like intransigence on Brexit could see the Tory party badly on the ropes in the not-too-distant future. The shine has rubbed off boisterous Boris, and Keir Starmer is well capable of putting paid to their conquest of northern England.

Trump may be out of office in January. Covid-19 vaccines may become available in the new year. We may have lived to learn how to contain Covid while relaxing the lockdown in the meantime – especially if we ensure that the HSE provides a massive flu vaccination programme in September-October. That is needed to keep our hospitals functioning in the face of sporadic Covid recurrences in the winter season.

Our new Government has its work cut out.