Spain surpasses Italy in number of confirmed coronavirus cases
Italy sees its lowest daily death total in weeks. Amy Kellogg reports from Florence.
Currently most Western countries are embroiled in political disputes and recriminations over which leaders responded effectively and which failed in the current crisis. Yet both so-called populists and globalists are threatened by the same virus that came from Wuhan.
From Justin Trudeau to Boris Johnson, the virus has unleashed a turmoil that is a challenge to all liberal democracies and market economies. Yet while our party politics — as is normal in democracies — engages in partisan debate, there should be no doubt as to the true culpability. As Paul Miller puts it "Xi Jinping did not create the virus, but his government is directly responsible for its global spread, and its terrible consequences for people and economies around the world."
If authorities in China had acted effectively when the disease was first identified — in mid-November — it might have been localized in Hubei and the pandemic might have been halted or at least significantly constrained. Yet, the heroic whistleblower Dr. Li Wenliang was prevented from sounding the alarm by the repressive regime. Instead, due to the heavy hand of the Chinese Communist Party, we are left counting the dead: Thank you, Chairman Xi.
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Chinese Communism sent us this scourge. The need to defeat the virus is, therefore, a wake-up call to face the Chinese challenge, but this will require some extensive rethinking of Western aspirations and the role of nation-states to achieve them. Are we up to the task?
Unfortunately, the G7 failed to issue a joint statement on March 25, due to the inability to agree with President Trump on naming the "Wuhan virus". Too many European leaders remain beholden to China and refuse to point a finger, despite the years of forced technology transfers, despite espionage via Huawei, despite the corruption of Western universities, despite the persecution of the Uighurs, and now despite the virus.
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It is high time now, in the face of the mass deaths made in Wuhan, that Europe joins with Washington to address the larger problem that has been mislabeled "globalization." The issue is Sinization, the programmatic transfer of hegemony to China.
Just as the United States and Europe differ in terms of their willingness to confront China, their policy responses to the economic challenges contrast as well.
American institutions have acted boldly and decisively. The Federal Reserve took the radical move of announcing unlimited quantitative easing on March 23, and Congress hammered out a bipartisan $2 trillion plan to fight the severe economic crisis. Even in a deeply divided country, despite the impeachment politics and the election-year rancor, Democrats and Republicans have been able to agree on a bold program in the name of their shared concern with the national interest.
The crisis is also an opportunity for the West to become great again: to defeat the virus and to face down China that sent it to us.
The European response has been less dramatic. At least on the monetary side, the European Central Bank (ECB) recognized the urgency of the situation and announced a 750 billion euros stimulus program on March 18; after the paralysis of the 2008 financial crisis, the ECB has learned some lessons, even though it remains much more cautious than the Fed, a reflection of its more limited mandate.
Yet on the fiscal side, the European Council has sadly proven unable to deliver an effective response, even though Goldman Sachs forecasts a minus 9 percent recession in the Eurozone in 2020. Italy, Spain and France will suffer severe consequences, but the European Union, due to the fiscal conservatism of some northern European countries, has once again refused to support its own members, thanks to its perpetual too-little-too-late strategy. We should expect unemployment, especially in Southern Europe, to rise dramatically.
Europeans have to realize that they should not wait for rescue from the European Union that evidently cannot match the stimulus package that President Trump signed on March 27. Instead, they must act on the level of their nation-states, if they want to contain the impact of the economic drama that is unfolding before our eyes. It is the nation, and not the EU, that is the proper tool to address this existential crisis.
The Dutch and German indifference to the Italian economic crisis is nothing new. European states must forget any illusions that European institutions will come to the rescue. Even the ECB does not need "Eurobonds" or Coronabonds in order to act since its quantitative easing program has been designed to buy national debt. France, Spain and Italy have to realize that their constant vulnerability is a symptom of European crisis management. They cannot settle for another lost decade.
Recognizing the role of the sovereign nation-state is not nostalgia for a distant past. In the wake of the Second World War, the brilliant success of the West was achieved through the cooperation of nation-states, not through the dilution of their power or their subordination to a post-national bureaucracy. The Wuhan virus crisis makes the necessity of the nation-state crystal clear, as the sorry display of European "solidarity" has proved once again. Border control, health strategy and economic stimulus have to be addressed on the national level. Brussels will only procrastinate and disappoint. The contrast with American policy choices shines a light on the limits of the EU.
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Nonetheless, the crisis is also an opportunity for the West to become great again: to defeat the virus and to face down China that sent it to us. Achieving this greatness requires coordination among the Western nations, within Europe and across the Atlantic. It is time for programs that boldly promote the well-being of the middle class, through both expansionary monetary and fiscal policy, and that can bring to Europe what President Trump called the "blue-collar boom" through investment programs and full employment.
This is the opposite of the globalization that exported prosperity and workplaces to China. Instead, we have to disentangle our supply chains from dependency on a communist dictatorship, pursue domestic policies that encourage growth for the benefit of the whole of society, and recognize that it is the strength of our nation-states that will enable each country, and the West together, to become great again. Capitulation to China is not an option.
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Nicolas Goetzmann is a Paris-based Asset Manager and Global Macro Strategist at Financière de la Cité.