The euro a victim of COVID-19?

The exceptional beauty and ominousness of this photo of the Rialto bridge in Venice — usually overflown with tourists — leads us to question everything that once was… This article adds the euro area as one of these things.

Now that the epidemic has taken over governments and societies in Europe, we need to question whether this crisis will have a long lasting impact on the politics of the continent and on its infrastructures.

Infections in China and Korea have peaked after 16 and 11 days respectively since when the number of positive cases had surpassed 500. In Europe, this is taking longer. Yet, many anticipate — and I tend to agree — that one after the other European countries will declare a peak during the month of April. If this is the case, I believe that the economic and social damage will be manageable with the current institutions. The crisis would certainly not have resulted in a new proud milestone of the European construct, but at least its institutions will survive.

More ominous scenarios lead to a different conclusion, though. And this article runs a worse case scenario, although fortunately not the most likely one.

If the crisis is longer than anticipated, the disruption that the virus would have created to the economies of Europe would be massive. It is clear that in this case, the virus would be a defining moment for the existence of the European Union: many think that the failure to act in a shared way would be a mortal wound for the common institution or, more likely its most exclusive club: the euro area.

To understand whether the area will be reinforced or killed by the Coronavirus crisis, one must look back and forward: ‘back’ to the recent trends in member countries’ cohesion and the state of European institutions; ‘ahead’ because how the current events will permanently change the member economies will make or break the EU.

The past: unflattering trends

To date, the union is complete only in its monetary sphere (shared currency, the euro, and common banks regulation). It is almost totally absent on the fiscal side (in 2019, the common budget was approximately 1% of total EU national income, in line with previous years).

The completion of a fiscal union, a prominent feature of the original project, was hampered in the past decades by a growing sense of mutual distrust between members. True that a fiscal union is a much more bigger step than a common currency. Because it links current accounts balances together — in…