NYT : Poland and Hungary Use Coronavirus to Punish Opposition

[Celerity]

The European Union seems helpless, even complicit, as authoritarian-minded governments cite the pandemic to consolidate their power.

https://www.nytimes.com/2020/04/22/world/europe/poland-hungary-coronavirus.html



BRUSSELS — Authoritarian-minded leaders around the world have used the coronavirus emergency to consolidate power. In Europe, the governments of Poland and Hungary have done that and more. They have managed to turn the crisis into a windfall and punish their political opponents, too. In a hasty effort to show that it was doing something to help during the virus crisis, the European Union repurposed 37 billion euros — about $40 billion — in structural aid funds, designed to help newer and poorer members, for virus aid. The result: Hungary and Poland each got considerably more money than virus-ravaged Italy or Spain.

Rather than punish two governments that have challenged the democratic values at the heart of the European project, the warped allocation of the money, with little oversight or requirement to respect the rule of law, looked more like a reward. It raised fresh questions about the European Union’s reluctance to criticize two governments that continue to flout the European standards of democracy and rule of law.

Prime Minister Viktor Orban of Hungary is exercising emergency powers granted to him by the Parliament he dominates to deny opposition mayors sizable tax receipts in the name of new virus funding controlled by the central government. Poland’s government, led by the Law and Justice Party of Jaroslaw Kaczynski, is planning to go ahead with presidential elections on May 10, despite a virus lockdown that prevents opposition candidates from campaigning effectively. The government is pushing a bill to require all 30 million or so votes to be cast by postal ballot, which the postal union says is absurd and impossible.

At the same time, Poland’s government is pushing ahead with changes to the courts, creating a chamber of “extraordinary control” that will be charged with certifying the elections. Nor is it clear if Warsaw will bow to a ruling by the European Court of Justice, the highest in the European Union, ordering it to suspend a new “disciplinary chamber” of the Supreme Court. Last Friday, the European Parliament passed a resolution criticizing the activities of both governments during the coronavirus crisis as “totally incompatible with European values.”

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[DFW]

1. Welcome to the EU

Bureaucrats with a free hand to allocate money are inefficient and corruptible.

Bureaucrats with a free hand to allocate lots of money are incredibly inefficient and completely corruptible.

[Celerity]

4. indeed, we are in a clusterfuck of epic proportions from most angles

[DFW]

5. No discipline at all, just gimme, gimme

Italy wants so-called "corona bonds" to bail them out of their old habits. Pre-Euro, they just devalued the lira, and presto, debts paid! Now, they can't do that any more, so they are telling the Germans, "bail us out," as if no one here in Germany had lost their job, or had to close their business. The Germans barely stood for being asked to bail out Greece, with their excessive number of useless government bureaucrats being able to retire on generous pensions at age 55. I don't think they are gong to stand for bailing out Italy, when enough of their own citizens are hurting. I think they'd rather leave the euro system first, and that means the whole EU collapses (and Putin says, "I win!" ).

[Celerity]

6. The coronavirus crisis and a euro area contained--in a prisoner's dilemma

As the eurozone faces into a deep recession, a transparent prisoner’s dilemma is preventing it from stopping the slide.

One of the two best policy options that might be available in the eurozone to face the dreadful economic consequences of Covid-19 is that the European Central Bank (ECB) buy on the primary market bonds issued by national governments or by the European Investment Bank (EIB), the European Stability Mechanism (ESM) or any other special-purpose entity. The only difference would be the intermediate institution receiving the money to be redistributed to the citizens. True, public debt monetisation is forbidden by the Maastricht treaty. But Paul De Grauwe, among others, is right to say we should be thinking ‘outside the box’ given the present unique circumstances.

An alternative option is what the US Federal Reserve is about to do and other central banks have done or are also considering doing—transfer money directly to the citizens, rather than to the states, without risking inflation. Either policy would allow euro-area countries to face the crisis without having to accept the burden of a heavy public debt potentially hampering their economic recovery. The worst option is where each country is left on its own. Not only does each then have to carry by itself the weight of the public debt to be repaid in the future. Doubts may also emerge on financial markets as to its capacity to resolve the debt, thereby increasing the interest to be paid on it. Such a negative market prophecy might become self-fulfilling, as fear that the debt might not be repaid would create precisely the conditions for this to be so.

‘European renaissance bonds’

Two mid-way cases lie between those extremes. In one—the second best—debt would be issued by a risk-free supranational entity and would therefore be a ‘safe asset’: the negative effect of an unfair and unnecessary market sanctioning, at least, would be avoided. Still, the burden of the debt to be repaid would remain, although proportionally among member countries. This is why, to soften the cost of repayment, proposals for eurobonds refer to a very long maturity, namely 50-100 and even infinite years in the case of irredeemable bonds (the famous ‘consols’ of the British tradition). Incidentally, rather than the gloomy ‘coronabonds’, the expression ‘European renaissance bonds’, would convey the positive idea that a cohesive European Union would be bound to a bright and successful future. A European-wide appeal signed by more than 1,800 economists is proposing such a name.

A second intermediate option is to use the pre-existing endowment of the ESM, allowing a guarantee of up to €410 billion—as the Eurogroup proposed to do at its last meeting on April 9th, albeit to a limited amount of €240 billion. Single countries would be indebted to the ESM, while benefiting from reliably low interest rates. Given the particular situation, it appears that strict conditionality will not be applied on the debt as under normal circumstances. But the debt will still be borne by the country and will be a burden it will have to bear alone. Can we really call this solidarity?

Fiscal stimulus

While we address these questions, though, in the US they are about to adopt a solution (included above among the best possible solutions for Europe as well) which promises to be as resolute as the one that allowed them to solve the global financial crisis more than 10 years ago, when they approved a $700 billion fiscal stimulus, while in Europe we started imposing fiscal austerity. The outcome of such different responses was self-evident—a prompt US economic recovery versus a European economy that was still stagnant when hit by the coronavirus.

The situation looks similar these days: the US is about to drop money in the bank accounts of Americans to a value of $2 trillion, while in Europe we are once more playing a selfish prisoner’s dilemma game, without even realising it, that prevents us from responding adequately to the crisis. This provides clear evidence of the benefits of a federal union, such as the US, as opposed to the heavy price in terms of ineffective policies that a mid-way intergovernmental association of countries, each of them looking to their own short-term interest—as with the EU—has to pay.

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[SheltieLover]

2. K&R

[Celerity]

3. thanks Sheltie