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Economic divisions have plagued the bloc during the economic challenges posed by the coronavirus pandemic. European Commission President Ursula von der Leyen presided over a deadlock regarding the bloc’s economic response to the coronavirus pandemic. The bloc managed to reach an agreement two days later than anticipated after arduous negotiations. Leaders reached a historic agreement for a £675billion (€745bn) coronavirus pandemic recovery fund on the summit’s fifth day after tense disagreement.
Dutch Prime Minister Mark Rutte had provided the strongest opposition to the plans on the table — which were said to have argued for a cap of £316billion (€343bn) worth of grants — preferring loans on strict conditions.
The Netherlands is one of the so called ‘Frugals’ – a group of EU member states which has argued for smaller spending commitments.
The split between these nations, mostly in the north of Europe, and the southern states, has led to bitter economic disagreements.
Historian David Marsh told Express.co.uk that the pandemic could provoke frugal nations to form their own monetary bloc.
He said: “Sometimes crises lead to people coming together more – there’s the old adage that Europe is ‘forged in crises’.
“But of course you can have a crisis too far, and some crises end in the whole thing – in this case monetary union – blowing up.
“I think both of these possibilities are out there, and it’s difficult to tell which one is more likely.
“There is a chance the whole thing will come to an end, because the legitimate demands of the southern states won’t be possible for the northern states to meet, which could conceivably lead to a southern state leaving.
“The Northern States could even depart as a bloc.”
However, Mr Marsh, author of ‘The Euro: The Politics of the New Global Currency’, believes it is more likely the bloc could form a “transfer union” which would see wealthier nations support the less economically stable neighbours.
However, the way in which this measure is implemented could have huge repercussions for the monetary union, he warned.
Mr Marsh continued: “I think this is slightly less likely though than the other option which is the bloc forms a transfer union.
“Of the two extreme options – a euro break up or a transfer union – both of those become more likely.
“The transfer union would be an expression of solidarity between the north and the south.
“The big question however would be whether this transfer union comes in in a fully legitimate way, authorised by Parliament, and by treaty changes which would need referendums in some countries – or through the back door.
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“At the moment, it looks as though it would come in through the back door – including through the massive bond buying programmes of the European Central Bank – which would not be good news for the long term solidarity within the monetary union.”
The economic split in the EU was also evident during budget talks earlier this year.
On one side of the debate is Austria, Denmark, Germany, the Netherlands and Sweden, dubbed by many as the ‘one percenters’.
They were staunch advocates for a limited spending scheme: one percent of the bloc’s gross national income.
They clashed with the ‘Friends of Cohesion’, composed mainly of southern and eastern European countries who argue for increased spending for less economically developed countries.
Some in the group support the Commission’s 1.11 percent of gross national income spending proposal, while others are also part of the ‘Friends of Farmers’ group, who have expressed fear over the demise of their industry.
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