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A green troika for Europe

Conditionality has become a central area of contention as the EU shapes its coronavirus recovery plan. The bloc should focus on the environment, not on fiscal responsibility.

Whenever the EU moves to help out its less fortunate members, the conditions attached to the help become the subject of fierce and vituperative debate.

The infamous Troika and the conditions they imposed on Greece during the sovereign debt crisis around a decade ago remain divisive to this day. But there is no need for the same attitude this time. The pandemic is an exogenous event and, though it has not affected every country equally, that is not because of fiscal irresponsibility.

Northern Europe’s hawks will point to slack Italian growth before the coronavirus hit and use that to push back on any grants without strict requirements for budgetary constraints and reforms to labour and pensions.

The greatest threat to the eurozone periphery, and thereby to the Union’s integrity, is not fiscal irresponsibility — the ECB has neutered refinancing risk — but low growth.

Grants are needed, not austerity. French president Emmanuel Macron has proposed a compromise solution: for funds to be conditional on compliance with carbon neutrality by 2050.  

Some of the more recalcitrant recipients may jibe about infringement of sovereignty but the control will be far less strict than it might otherwise be and, in any case they, like the Frugal Four of Austria, Denmark, Sweden and the Netherlands, will have to learn that EU membership comes at a price.

Everything about the EU’s response to the coronavirus crisis has found a way to work in a climate angle. It will be tough for reluctant states to push back on grants calculated to promote investment in projects designed to benefit the climate.

But that’s fine. If the problem is one that affected all countries, let the solution be one that benefits them.

And if rescue funds must come with conditions, let’s make them green.