At the beginning of 2019 the EU was already facing an economic slowdown as President Trumps various trade conflicts hit global trade, while fearing that Europe could be next in line for US tariffs on its exports. The impact of Brexit remained traumatic, with uncertainty continuing about what it would mean for the EU and EU-UK relations. In the short term this uncertainty focused on the post Brexit EU budget, with the North insisting it would contribute no more and the South insisting it could receive no less. Northern public opinion was already frustrated that Mediterranean countries, despite boasting higher growth figures in recent years, had done nothing about their structural fiscal deficits. Although there was growing recognition that the EU lived in an ever more volatile external environmental and needed a “more geopolitical” Commission, little progress had been made towards a common foreign or defence policy.

The COVID-19 outbreak impacted on these tensions like a meteor impacting on the earth: the dinosaurs were immediately endangered. Problems the EU was find difficult to manage suddenly became existential for the Union itself. The immediate impact was to demonstrate the irrelevance of Union level institutions in crisis management or the protection of EU citizens. Those citizens looked to their national governments for protection, and these reacted according to their calculation of national interest, closing borders, preventing the export of medical equipment, supporting their companies and confining their citizens to their homes. The European Commission was unable to play even a coordinating role, reduced to approving post facto breaches of European treaties and derogations of European citizen´s rights. As in the Great Recession, the only European institution to play a proactive role was the European Central Bank which, after a shaky start, began pumping enormous quantities of liquidity into the economy.

The COVID-19 also increased the volatility of the EU´s external environment. As core of the outbreak shifted from China to Europe, China sought to pacify criticism of its handing of the crisis by offering medical supplies to the countries worst affected. Citizens in these countries contrasted this support with the lack of help from either the EU or fellow member states. But China also responded to criticism of its handling of the crisis with attacks on the mismanagement of European governments. European debates about over-dependence on China, or the presence of the Chinese company Huawei in European mobile networks, have re-opened. But Europe is not united on these issues, with security concerns balanced by fears of losing economic and commercial benefits. A new divide is emerging, with many Southern and Eastern countries looking to Chinese investment to help drag them out of the economic recession which the crisis has driven them into.

Europe´s attempts to develop a new relationship with China are complicated by the renewed confrontation between China and the US. President Trump is seeking to blame the Chinese Government for the virus and up the tensions with Beijing to distract attention from his own mishandling of the crisis. The tensions between Beijing and Washington will get worse in the run-up to the November elections. But there is bipartisan agreement in the US on the need for a tougher containment of China. It will not disappear if Trump loses the election. This poses a serious dilemma for Europe. It is unhappy about China´s human rights record, especially in Tibet and Xinjiang. It is concerned by the threat to Hong Kong´s autonomy. It wants to reduce its dependency on China. But it does not want to be led into a US led Cold War against China which would endanger its commercial interests there without any obvious compensation on offer in the US. Europe does not want to trade over-dependence on China for over-dependence on an unreliable US.

The most immediate, and existential, issue for Europe is how to fund and dispense the post-COVID economic reconstruction fund. The southern countries would like to mutualise the debt such economic reconstruction implies through Eurobonds. They fear the stigmatisation that special grants and loans would imply would increase their difficulties in raising funds in the money markets, driving the divergence between bond yields in south and north to unsustainable levels. The north rejects the idea of Eurobonds and insists that the south must take responsibility for past fecklessness. To some extent the fight over the EU budget is being re-fought, but with far higher stakes. The French and Germans have proposed a fund controlled by the Commission dispensing grants to those needed and funded on international financial markets. The Commission has adapted this slightly by suggesting that the money dispensed should be a mix of loans and grants. Still the so-called “frugal four” say no. There will be negotiations and, as ever in the EU, there will be a fudge. But it remains unclear whether the concessions that the Commission will have to make to the “frugal four” (a greater proportion of loans to grants and much tougher conditionality) will be acceptable to countries like Spain or Italy.

The COVID-19 outbreak has brutally unveiled the tensions and contradictions in the European project. In a crisis, Europe´s citizens look to their national governments for salvation, and their national governments respond with little thought for European collaboration or European institutions. The virus has converted serious tensions within the EU into existential challenges. It does not mean that if the EU cannot reach agreement on an economic reconstruction fund that the EU will collapse, but rather that the “Union” will be ever more theoretical than real.