vives10_JAMES ARTHUR GEKIEREBELGA MAGAFP via Getty Images_lagardemichelvonderleyen James Arthur/Gekierebelga Mag/AFP via Getty Images

Europe’s New Defining Moment

The COVID-19 pandemic represents a major opportunity for the European Union and the eurozone to act decisively on a common problem, thereby strengthening the bloc's solidarity and integration. So far, however, European leaders have failed to seize it.

BARCELONA – The European Union and the eurozone are approaching their second defining moment in a decade. The first was the debt crisis that started in 2010 and was quelled by European Central Bank President Mario Draghi’s July 2012 pledge that the ECB was ready to do “whatever it takes” to preserve the euro. The ECB backed up Draghi’s declaration by introducing the outright monetary transactions (OMT) scheme, an emergency sovereign-bond-purchasing program that fortunately never had to be used.

The EU then established a banking union, with the ECB assuming the role of bank supervisor and a common resolution mechanism dealing with failing institutions. But this union is still incomplete, because the resolution backstop is insufficient for a major crisis and there is no common deposit-insurance scheme.

More generally, as a monetary union that lacks a fiscal union to share risks, the eurozone is an unstable creature. And COVID-19 represents a major shock that calls for huge expenditures – not only on health care, but also to keep the European economy on life support while lockdowns and social-distancing measures are in effect.

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