Managing the unimaginable

A day of reckoning is coming for the EU – the battle of values and what it means to be part of the European project. That’s what’s on the line in the budget negotiations next week. And it’s not going to be pretty or rational, given what’s at stake.

The standoff is palpable and what the EU has at its disposal to address it is limited. This will require a dose of leadership steroids. Unfortunately, it’s a test which the EU project hasn’t prepared for.

Shuttle diplomacy isn’t going to cut it, given the political posturing from Poland and Hungary. A stalemate also won’t be palatable or acceptable given the ticking economic time bomb. Let’s remind ourselves: we are up to our eyes in public debt, unemployment is set to hit record highs and national governments have very little wiggle room to sort this crisis.

Once again, the notion of solidarity amongst EU states is being tested. What’s apparent is that there is a very clear dividing line in the EU between those that will be able to absorb the economic shock and those that won’t.

Time is running out.

If we are to prevent another decade of recession and hardship for the EU, member states will need to buckle under the reality of their interdependence. One economy’s success or failure relies on the rest, despite any faux notions of going it alone.

The second COVID wave could either be a recipe for disaster, or a unifying call to action. Time and history will tell.

To add to this already complex and politically charged situation, is that many of the forecasts for the recovery plan rely on capital markets performing according to predetermined scenarios. Well, if this year has taught us anything, it’s that usual scenario planning isn’t going to help given the unpredictability of the pandemic’s impact.

This is a moment of reckoning on a magnitude hitherto unknown for many of today’s EU. So, is it time to say, “you’re either in or out”? Whilst this is the seismic option, do our current, unprecedented circumstances allow for anything else? The alternative is interminable delay and negotiations whilst people, communities and businesses go to the wall.

By taking a firm stand, the EU leadership will do itself a much-needed favour, which is to muscle up and to say what it means to be in the EU.

This defining moment could also be an opportunity to re-evaluate other big-ticket items. For instance, now may be the time to reconsider how we measure economic growth and wellbeing. Is GDP a resilient measure capable of gauging how our societies are doing? The EU could lead the way in redefining GDP to account for the fundamental changes afoot.

Structural forces will, at the end of the day call the shots: be it fiscal or monetary policies and, more importantly, the indicators these are based on. Both of these levers, in the current economic context,  provide relief given the historic public debt being incurred. Together with the collapse of SMEs – the bulwark of the EU’s economy – the role that tax can play in the foreseeable future as a valve to generate revenues for the public purse is severely constrained.

A vaccine on the horizon won’t help with this set of complex interrelated issues, which, if not addressed holistically, will cause untold damage to the EU’s future economic survival and recovery.

The impact of the virus and the challenge it has posed to governments suggest that unpredictability is the new watchword for leadership. It has also demonstrated the weaknesses in our current systems to take action where it matters, which is at a city/municipal level – especially in coordinating multiple services and implementation across the usual silos of how local and national governments operate.

There’s a lesson to be learned in how future governance models will need to adapt and evolve to better respond to future crises, of which there are likely to be many. COVID-19 has been a stress test for what’s to come. What we know is scenario planning isn’t helpful in this current context of the virus crisis. The EU should take heed of this experience and adopt a modus operandi that is prevention and preparedness focused.

That’s why it’s crucial that the EU forge a war room mentality and approach to policymaking and political management. The mould of EU operations will need to be broken to hatch a new way of working that is fit to serve its citizens in a future that is laced with unpredictability. The EU needs to claim the position of reason, underpinned by a guiding philosophy of its values and temerity to do the right things, to uphold its raison d’être!