Europe's Response to the Coronavirus

Operator: Excuse me, everyone. We now have all of our speakers in conference. Please be aware that each of your lines is in a listen only mode. At the conclusion of today's presentation, we will open for questions. At that time, instructions will be given as to the procedure to follow if you would like to ask a question. I would  now like to turn the conference over to Karen Donfried. Please go ahead.

Karen Donfried: Thanks, Todd. A warm welcome to all of you on today's Council on Foreign Relations conference call on Europe's response to the coronavirus, with Charles Kupchan and Mattias Matthijs. I am Karen Donfried, President of the German Marshall Fund of the United States, and I will be presiding over today's discussion. I am delighted to engage Charlie and Mattias in conversation about this critical and timely issue. Charlie is a Senior Fellow at the Council and a Professor of International Affairs at Georgetown University. He served in the Obama Administration as Special Assistant to the President and Senior Director for European Affairs at the National Security Council. Mattias is also a Senior Fellow at CFR and a Professor of International Political Economy at Johns Hopkins SAIS. We couldn't have two more knowledgeable and thoughtful speakers. Before I turn to them, I just want to remind all of you on the phone that this conference call is on the record. And with that, Charlie and Mattias, I want to ask you to begin by stepping back from the daily news cycle and share with us what are your main takeaways at this point, as you assess Europe and its response to the coronavirus crisis? And Mattias, why don't we start with you? 

Mattias Matthijs: Wonderful. Thanks, Karen, and thanks to all of our CFR members and the members of the media for doing this call. So what struck me, as I saw this kind of slow motion trainwreck evolve, starting with Italy and then spreading to the rest of Europe, I think that the first point, and I'll make four brief points, but the first point is that you clearly see that public health and fiscal policy, the two key policy areas to which member states need to go to respond to their national responsibilities rather than the EU responsibilities. So that's the first striking thing. You can't really blame the EU for not being quick in response. This is just not their competence, and that's what member states want, right? And so, the initial response, I think, was kind of marked by maybe a somewhat dogmatic commitment to the four freedoms. If you're trying to quarantine something and stop something, you shouldn't be too ideological about closing borders, so that's a pragmatic thing you're doing for a short period of time. And this is not going back on certain freedoms, the same with the freedom of trade and goods and services that we saw immediately, Germany initially, refusing to export medical supplies to Italy, because they wanted to keep them for themselves. I mean, that's been sorted out, but you see that Europe still has growing pains. The second thing that I think you see, and it's very clear in just the last few days, is that whenever EU officials tell me that there's no such thing as a north/south divide in the eurozone, they're usually lying. I mean, what we've seen again is when the question is now about what can Europe do in response together, what can they do when it's Euro Bonds (ph 0:03:40.2), whether it's stepping up or completing the eurozone for the financial or the fiscal response. Then there clearly is a north led by the Netherlands and Germany and a south led by France and Italy that sees these things very differently. And the last two points I would say is, third point, is what's very striking for an American of European origin living in Washington, D.C., is there's a complete absence of US leadership or US involvement in Europe, even compared to the euro crisis before, when Tim Geithner and Barack Obama took a very active interest in what was going on. And you  see, I mean, that's of course, it's a (inaudible 0:04:21.9) within the US as well, but the president is squarely focused on the United States and not too concerned about coordinating in an international or a global response the way the Bush and Obama previously were very keen on developing the G20 and a kind of global response, and also leading it through the Federal Reserve and so on. And the last point I would say is that the issue that's been dominating my own research and many people studying Europe the last 3-4 years, Brexit really looks like a kind of, almost ridiculous or a frivolous vanity project right now, right? I mean, it's clear that this is still going to happen, but it is also clear that the coronavirus is so big, so important, so all encompassing that it's now very clear that Prime Minister Johnson, Boris Johnson, will have to ask for an extension to these negotiations, because this is now such a low priority for Brussels, and even for Britain, to be frank. And so, those are kind of my initial thoughts as I've been watching this over the last month, month and a half.

Karen Donfried: Thanks so much, Mattias. Charlie, let me turn to you  and ask you to share your main takeaways.

Charles Kupchan: Sure. And these will overlap with what Mattias just outlined. But let me offer two quick caveats to start with. One is that we're still very early in this crisis. We don't know how long it's going to last. We don't know how deep the economic dislocation will be. And so, I think everything we say has to say with the proviso of this is as of today at 2:00. Who knows where we'll be next week at this time? And the other thing is, I think we should avoid playing the numbers game, because the numbers are fuzzy. We don't have good data about how many people are infected, how many people have died, and so I think it's hard to kind of go out there and give a scorecard of this country's doing great, this country's not. I don't trust the numbers in a kind of way that lets us draw conclusions. So with those caveats, I also have four quick top lines. And the first is that I completely agree with Mattias that the kind of near-term most likely topline risk for Europe is the return of a sovereign debt crisis that looks not unlike what we saw the last time around, where you do see a north-south divide. And yes, right now, we're seeing some positive statements about suspension of the fiscal rules. We're seeing some positive statements about the ECB doing whatever it will take to give credit lines to Italy. But having served in the National Security Council during the last round, I saw how difficult it was to form a consensus, and the degree to which Germany, the Netherlands and other countries, when it comes to putting their own taxpayers on the line, they're going to be quite reluctant. So I do think there is a lot of hard work to be done on this front, and another quite difficult issue will be if, in fact, such credit lines are extended, what kind of conditionality will there be? We've already seen, during the coalition of the League and the Five Star Coalition the degree to which Rome was standing up to conditionality from Brussels on fiscal issues and debt issues. Second is that I agree with Mattias that it's not surprising that the initial response has been largely national, and that's because health and fiscal are national competencies. But I do think over time, we've begun to see a more collective response. We've gone away from export bans nationally to more of an export ban on medical supplies EU-wide. The ECB has stepped, as I said, for the first time I believe in its history, the EU has suspended fiscal constraints, the so-called fiscal estate clause. A debate is now taking place about Eurobonds and the mutualization of debt. I think both Mattias and I are both also skeptical about whether that's going to happen, but I don't think that what we're seeing is the EU stepping up, and I think if one extrapolates, what we're looking at is not the end of  Schengen. I think borders are going to come back down when the crisis abates. But probably external borders are coming back up. More anti-immigrant sentiment than before, more anti-globalization sentiment and less outsourcing of jobs and supply lines, less focus on neighborhood policy and what's going on outside the EU, politically, strategically and economically. Third takeaway - I think that one of the $6 million questions here is, is this crisis going to fuel the populist fringes? Might we see AFD come to power in Germany or the National Rally come to power in France? You know, we don't know the answer to that. A lot depends on how long this crisis last. But so far, I think what we're seeing is a tendency to rally around the leaders and to rally around centrist governments. Popular trust in major EU member states is going up. Macron is at a two-year high in popularity, above 50 percent. Conte's popularity ratings in Italy are up near 70 percent, the highest rating of a prime minister in 10 years. Merkel is holding steady. So, so far, so good, when it comes to rallying the flag. Obviously nobody knows how long that's going to last. But it does contrast with Trump's approval and popularity ratings, which are still sort of stuck where they were in the mid '40's. Final takeaway - again, agreeing with Mattias. The absence of US leadership is striking, and also, I think, growing European disaffection with the United States. Trump imposed the travel ban without consulting the Europeans at roughly the same time a flight arrived from China, bringing medical supplies to Italy. Trump tried to ruin (ph 0:11:18.3) a German company that deals with development of drugs. It looks like the US is kind of going on its own to the detriment of others. And so, I do think that right now, China is some ways, despite the reputational issues, more of the winner and the US the loser in Europe. And one thing that I think is important here is the effects of the coronavirus on Trump's prospects for reelection. If he is reelected, I think we may, to some extent, reach a breakpoint with Europe. If he is not reelected, I think the Atlantic relationship will look much stronger moving forward. 

Karen Donfried: Super. Thanks so much. Let me draw you out and turn on some of the points that you made. Mattias, both Charlie and  you, on the one hand, spoke about the fact that coronavirus does not respect borders, and over time, maybe you're seeing more of a European response to this. On the other hand, you were both very clear that there are real tensions in the Eurozone, and there are some people who are arguing that the coronavirus is not perhaps the coronavirus crisis. That's not that different from the Eurozone crisis or the migration crisis, in that Italy is very much in the crosshairs. Now, we've seen the European Central Bank take some dramatic action last week in terms of the decision to expand asset purchases by 750 billion euros over the next nine months, but that said, do you think it is likely that the coronavirus crisis will lead to a new Eurozone crisis? And at the end of the day, does that come down to Germany's willingness to bail out Italy?

Mattias Matthijs:  Yeah, it certainly is looking that way, right? What the Eurozone crisis and migration crisis and this crisis all seem to have in common is that the front line crisis is in the Mediterranean, right? Of course, it was Greece as well, with refugees and with the euro in 2010. But I mean, as many people have pointed out, Italy is six, seven times bigger than Greece. Its sovereign debt that it's sitting on is well north of 2 trillion euros. And that's money that needs to be - that's debt that needs to be refinanced every so often. And the question then becomes can it be refinanced at the same low interest rates, right? So with the actions we've seen that guided the ECB, after her initial hiccup during her press conference, which she's opposed (ph 0:14:00.7) judged for, that it is indeed a  problem for the ECB if spreads between Italy and Germany widen too much. So that's been done. But now the question is, I mean, if this crisis, and I couldn't agree more with Charlie, when he says that we don't have good data right now, but you don't have to be an economist to figure out that the first quarter, which is ending next week, by the end of March, is gonna be a terrible one for Italy, right? So here is an economy where GDP will be collapsing, and not just by 1 or 2 percent, but by more than that, because you've shut down the whole economy now for about a month. And this is both the supply side and on the demand side, of course, that the existing debt as a percentage of GDP this year, is gonna go through the roof, right? So then the question is, is Europe willing to either extend a massive credit line to the Italians through the European stability mechanism, which has the fire power, but then, that's when the question of conditionality comes in, right? So this is a government, at least the second Conte government. The fist Conte government came to power opposed to conditionality on fiscal affairs. So this is now with Matteo Salvini in opposition, and the Lega still riding very high in the polls, and again, we don't have good recent polls yet, but this is something that's gonna be - I mean, it's a poison chalice that they didn't offer to the Italian government (ph 0:15:28.8), and that they're going to be able to accept it. So that's when then I think the person to watch for all of us in the coming weeks will be Emmanuel Macron. He's by far the strongest leaders, who's the most comfortably in power. He's also shown that he's willing to stand up to Germany when it comes to this. So will he be able to convince, first of all, Germany and maybe also the Netherlands to allow very, only symbolic conditionality for (inaudible 0:15:56.5)? And then again, a structural solution, which many of us who study Europe have been arguing for, is a commonly issued Eurobond. It doesn't have to be moral havoc per se. It could also be an instrument that allows the EU to rival the dollar and to have a very attractive instrument that global financial markets want to buy, that everybody would benefit from, right? And so, that's what's not clear right now. It seems to be they're very much back into their positions of northern saints in the north of Europe, and the kind of frame of southern sinners when it comes fiscal profligacy and so on. 

Charles Kupchan: I would just add two words to what Mattias just said, Karen. And those are go big, because I think the mistake that the Europeans made last time around was taking incremental baby steps. You know, (inaudible 0:16:46.8) and her cohort would agree to do something on Greece, but they didn't go big. And they didn't rip the band aid off. And given the scale of the economic downturn that we're looking at in places like Spain and Italy, it seems to me it is better to start big than it is to get stuck again in incremental steps that don't do the trick.

Karen Donfried: And Charlie, let me just ask you to speak briefly to this point about the absence of US leadership. We could argue the US is going big in a national sense, in terms of a response. We just saw that a stimulus package that the Senate agreed on, but what are the broader trends here? You have a United States that is willingly ceding its leadership, no attempt to coordinate an international response. You mentioned China jumping in immediately to try to fill that void. We're seeing the Russians do the same thing. We're seeing those Russian planes flying into Italy with medical aid, having on their fuselages stickers saying, "From Russia With Love". Are we moving to a post American world, and does it just come down to the US election in November? Is this about a cyclical change, or are there deeper structural trends at work here?

Charles Kupchan:  Well, you know, I think in some ways, the United States is pushing Europe toward Russia and China. They aren't really doing so willingly, I guess, with perhaps the exception of the Belt and Road Initiative, where the giant sucking sound of the Chinese economy has lured EU member states to deepen their economic ties to China. But I do think that Europeans feel quite frustrated and forlorn by the degree to which the United States does not seem to be a team player. I mean, it's quite striking to me that the G7 got together in the midst of this pandemic crisis sweeping the world for the first time, five days ago. This has been going on now since late last year. And one would have hoped that there would have been some kind of gathering of key leaders, and it didn't really happen until just a few days ago. And that to me speaks volumes, and does it just depend on the US election? Yes and no. I do think that Europeans are hoping and praying that the Trump administration is a one termer. If he is reelected, I do fear, to some extent, Europeans will feel that it is the American public and not just the American leadership that has turned away from Europe. But you know, this all will play out in the days ahead. And I don't think it is too late to repair the relationship, but it is going ot take a very different kind of diplomacy than we've seen over the last three years. 

Karen Donfried: Mattias, let me bring you in on this. On the one hand, you could say this is last (ph 0:20:16.3) a Transatlantic difference than a split between those seeking nationalist responses and those still believing in internationalism. And that dividing line goes right through Europe. So how do you see these broader dimensions in terms of a relationship for the United States, and how profound a crisis do you think this is for European integration (ph 0:20:41.7)?

Mattias Matthijs:  Yeah, I mean, I think you've put your finger on the wound as it were or (inaudible 0:20:49.5), because there are real consequences for the liberal international order from that point of view, right? I mean, in the end, Trump didn't quite start this. He tapped into nativist sentiments, protectionist sentiments, anti-immigration sentiments, as did many, especially rightwing populists all over Europe. And so, what this coronavirus crisis is doing, and I think everybody knows this is even their own individual behavior, it makes us more skeptical, right, of international trade, kind of brave new world of globalization, where we let companies kind of go all over the world, and from a value-add perspective, in the most efficient manner. It makes us more wary of international travel. It makes us more suspicious possibly, potentially, of foreigners, right? And this, I think, something that even a Joe Biden presidency is not going to be able to change. Similar with Europe. I mean, Europe in the end is a very progressive, liberal project, right? I mean, I agree with Charlie that we're not gonna get rid of Schengen, but I think there's going to be many more controls. I think the kind of 1990's/2000 world is not going to come back. And you see this, even among centrist politicians. They have become more skeptical. Will we see a kind of European protectionism, where there's kind of more of an emphasis on European sovereignty, in a way that EU wants to compete directly with China, with the US, when it comes to industrial champions, when it comes to having its own strategic reserves, and even its own strategic view of its own currency. That, I mean, many of us have advocated for this, and it would make the Euro project, the European project more sustainable. But I think the divisionism, as you rightly say, is still very much there. And it is a kind of Dutch, German, even the UK, that's, of course, leaving and less now. But they still see this kind - their commitments to globalization and the liberal order is way stronger than many other countries. And I think corona will have made this a little harder to reverse the kind of genie we let out of the bottle in the last five years.

Karen Donfried:   Well, thank you so much. At this moment, I'd like to invite members to join our conversation with their questions. So, Todd, let me ask you to bring in those questions.

Operator: Yes, at this time, we will open the floor for questions. If you would like to ask a question, please press star key, followed by the one key on  your touchtone phone now. Questions will be taken in the order in which they are received. If at any time you would like to remove yourself from the questioning queue, just press star two. Again, to ask a question, please press star one. 

Karen Donfried: And I'll just remind that the meeting is on the record, as we begin to take those questions. 

Operator:  And callers, please announce yourself before stating your question. You will be notified when your line is live. We'll take our first question. Caller, please go ahead.

Nick Turse:  Hi, this is Nick Turse from The Intercept. Given what we've already seen in Italy and Spain, I'm just wondering if you could weigh in on how bad this could get, not in terms of numbers, but really, compared to other cataclysms that Europe has endured since say, the beginning of the 20th century. And how long could it take for Europe to recover without a Marshall  Plan or something of that sort?

Karen Donfried: Mattias, do you want to start on that?

Mattias Matthijs: I was going to have Charlie go first, because it's a 20th century question.

Karen Donfried: Charlie, go ahead.

Charles Kupchan:  I'll take a quick swing at it. We just don't know. You know, I think that the debate that is occurring in this country about the longer term, more holistic costs to keeping shut down for months has to be compared against the benefits, the health benefits of tight lockdown. You know, conceivably what you could say is contractions in the economies of countries like Italy and Spain that are on par with the 1930's. So much depends upon the trajectory of the virus and the degree to which we can flatten the curve, that it's very difficult to say. Right now, that kind of outcome is not in sight, but as I said, we're still early in this, and I think we need to take it day-by-day as the information comes in. 

Karen Donfried: (Inaudible 0:25:57.5) thanks. We can go to the next question.

Operator: Thank you. We'll take our next question. Caller, please go ahead.

Emerita Torres: Hi, this is Emerita Torres with the Soufan Center. I'd be interested to know - I've been reflecting a lot on the UN's Security Council's response to global crises, particularly the Ebola outbreak, as well as the US' role in that, looking at the UN Security Council resolution, etc. And I noticed the G7 has met or is meeting. The G20 is meeting, so I’d be interested to hear your views on the international response. Do you think we'll see something coming out of the UN, or elsewhere in the coming days and weeks? Thank you.

Karen Donfried: Who wants to take that?

Mattias Matthijs: Yeah, I mean, I think as we have suggested - I mean, the fact that the US is not leading makes this very problematic, right. I mean, in general, in any collective action, there needs to be a sort of -what do you want to call it - a hegemon or some sort of leader that is able to kind of fill this leadership void and kind of coordinate this. The G7, as Charlie mentioned, had only met recently. I haven't seen a clear statement from it. Same as the G20, right? It's kind of every country for itself. That's what happens when you shut down borders and travel and so on. So it's not clear that - Karen mentioned the $2 trillion stimulus, which is eye-popping and me, eye-watering figure. But it's not clear it can do much for the world economy if trade is completely shut down, right, or at least is at a much lower level. And I do think it is striking so far that we haven't seen any coordinated response, because I think there's this kind of heavy emphasis on zero sum nature of this crisis. It's like, well, we need our own masks. We need our own ventilators. If we start shipping them abroad - it's only now that China is kind of ramping up production, now that seemingly they can. So I would expect, actually, right now to solve the crisis, the health crisis, that is, I expect actually much more from the Chinese at this moment than I expect from the Europeans or the Americans, who are much more focused right now on fighting their own crisis at home.

Charles Kupchan: I would just add that I think it's a little bit difficult to draw analogies to the Ebola crisis, because in that case, everything was sort of functioning normally in the United States, in Europe, and President Obama was able to hold meetings in the situation room and then pass out help elsewhere. And that's largely because even though the Ebola crisis threatened to spread, it was largely located not in our countries.  And now that this is here, and we are all in shock and shut down, I think it creates a very different kind of political environment than when US and Europe are functioning relatively normally and dealing with a crisis in the third area. 

Karen Donfried: (Inaudible 0:29:18.3), thanks so much. Let's go ahead and take the next question.

Operator: Yes, we'll take our next question. Caller, please go ahead.

Mike Hodin: This is Mike Hodin. I'm CEO of  the Global Coalition on Aging, a bunch of global innovative companies like Intel, Phillips, (inaudible 0:29:43.2) and Pfizer, etc. My question goes to your point about the lack of global, or let's call it even international leadership. The two areas that we seem to be responding to, totally understandably, are in a way crisis response. One is on public health, we've all talked about. And the second is the economic answer. And hearing that we're not (ph 0:30:17.5) is a massive global innovation effort with technology and medicine for the cure. We're actually seeing a lot of really interesting possibilities out there, but there's nothing going on right now that's sort of massive global leadership effort, to bring this altogether to find the answer. Think polio. That would do more to flatten the curve obviously, and that would address it. And it's just about a vaccine, it's about a therapy. But there's global leadership, which you correctly point out, we do not have right now. And that is - if we did that, it would also then paradoxically lead to perhaps a recognition of how the Atlantic alliance has the enormous value. 

Charles Kupchan: You know, I think your question is larger than the current pandemic in that it underscores the degree to which we're moving into a period of history in which there is a growing gap between the supply of global governance and public goods - I'm sorry. The demand for global governance and public goods and the supply, because on cybersecurity, on nuclear proliferation, on virtual currencies, on all kinds of other issues, we now live in a world where we need countries to come together and cooperate on the technological issues that you're talking about. But unfortunately, the trends are heading in an opposite direction. This goes back to before the pandemic, but I think that Mattias made an important point when  he said that this pandemic is causing all of us to turn inward, to be more protective of our borders, more suspicious of foreigners. And unfortunately, it's kind of reinforcing this desire to pull away from collective enterprise, but it's exactly the opposite of what should be happening. 

Mattias Matthijs: Yeah, I would add that if you want to have a kind of, almost a moon show at this point. And it isn't quite a moon show. This is - let me compare probably better to the Manhattan Project 75 years ago. You need to kind of beg up from the investment, right, to come up with either a vaccine or at least a kind of treatment that makes this corona disease, COVID-19, manageable. And  you know, we have all the most brilliant people in the world working on this, but they need upward investment that only governments and the US governments (1) could easily provide - would have huge payoffs, because you need to speed up everything, right, from coming up with the cure, from clinical trials, all that sort of stuff. I mean, as far as I understand from our epidemiologists and experts at Johns Hopkins University, this is all possible. You just need an incredible amount of money to put behind it. And it seems to me, if the US were to ask its allies or in the G20, if they could make some money available for this, and you could coordinate it internationally, I mean this doesn't strike me as that complicated to do, because clearly, the whole world would have a stake in this. And that, again - I mean, right now, we have a president who's mostly worried about the stock market going up again by Easter, and having everybody back at work. And so, there's a kind of complete disconnect between domestic worries and reelection worries and kind of what would be needed globally to fight this.

Karen Donfried: Do either of you believe that Europe or the European Union could be poised to play a leadership role in pushing for that kind of big up-front investment?

Mattias Matthijs:  I mean, I would be skeptical right now, because they still seem to be fighting the last war right now again, where they're mostly still looking internally at fixing their own problems, both fiscally and, of course, the health crisis that's going on. And that's what you kind of see. I mean, even if it's true, what they reported in the Sun, that Boris Johnson was forced to move his national lockdown after a very angry phone call from Emmanuel Macron, who told him he would shut down the border between the UK and France completely, if he wasn't going to take this more seriously. So if you're in the midst of this, and blaming the national game, and you should all be acting more responsibly, then I think it's very hard to kind of come up with, let's say, I don't know, a 100 billion Euro fund to put together scientists to work on this. So it seems to me you need a kind of massive public/private partnership. And time is of the essence, right, so every day you wait, this money becomes less - gives you a kind of less return. But maybe Charlie's more optimistic. 

Charles Kupchan: No, I mean, I think a lot depends, Karen, on a country that you know a lot about, and that's Germany. And Macron strikes me as the kind of leader who could step out and push ideas of this sort that you're talking about, and he's been forward leading on debt issues in Europe and other issues. But over the course of the last year or two, Berlin has been markedly timid. As you know, Merkel has been quite cautious and risk-averse and staying quiet and rarely responding to rather bold initiatives that Macron has taken on a number of different fronts. Is this crisis Merkel's wakeup call? Is she now going to team up with Macron to provide the kind of leadership that I think many of us would like to see? I wouldn't bet on it, but you may know better than I, or either Mattis or I.

Karen Donfried: Yeah, thanks to you both. Let's go ahead and take the next question.

Operator:  Thank you. We'll take our next question. Caller, please go ahead.

Alex Wallace:  Hi, it's Alex Wallace from Verizon Media. My question is, are any of the European countries potentially susceptible to civil unrest if this health crisis continues?

Charles Kupchan: Well, one of the things that's happening as we speak is that individual countries, the French the most recently, but others as well, are stepping up their unemployment benefits, basically taking relatively generous welfare state systems for unemployment and making them even more generous, so for example, if certain countries, private sector salaries will be fully paid by the state, i.e. individuals will not be laid off. We're kind of looking at these similar sorts of steps here in the United States through the deal that seems to have been struck late last night. And so, those sorts of steps are necessary to prevent folks from basically being out on the street and not being able to buy food. But again, let's wait and see where this crisis goes. But I do think those kinds of steps are essential, because if they were not taken, then yes, I could imagine social unrest and riots and other kinds of violence on both sides of the Atlantic. 

Mattias Matthijs: It's an excellent question, because there again, I would focus on both Italy and Spain. They've seen the brunt of austerity policies from 2010 to 2020. And I think it's fairly clear now that the public investment in the health sector hasn't been there the last 10 years, and they're kind of getting a second (inaudible 0:38:58.3) in their health systems. I mean, I'm sure many of CFR members have seen some of the hospital scenes in Northern Italy, and now it's spreading all over Spain very rapidly, where hospitals are completely overwhelmed. And it's now clear that there hasn't been enough resources, and these are also two countries that don't have the generous welfare states or the automatic stabilizers that countries like Germany and France have. So one thing we saw, because of the effect of the  Euro crisis, is that the Euro was as beautifully converging - economically converging instrument from the mid-1990's to 2008, where you saw countries like Greece, that were 60 percent of German standard of living, go all the way to 80 percent of German standards of living. Well, they're now back to less than half. And so, Italy, that's now about 75 percent GDP per capita of Germany, this could diverge even further. And then, you could have the real consequences of riots in the street. But also, a lot of people may start to ask - I mean, what's Europe good for? Europe used to be this great carat that delivered lower interest rates and lower inflation and higher growth and more trade, you know, and all kinds of cheap travel. And now, it's not clear. So that's where I do worry that both left wing and right wing populism, if this crisis continues for much longer, will have very fertile grounds.

Karen Donfried: Okay,  thanks. Let's go ahead and take the next question. 

Operator:  Thank you. We'll  take our next question. Caller, please go ahead. 

Jonathan Hale: Hi, this is Jonathan Hale from Senator (inaudible 0:40:50.2). I was calling to ask how Eastern Europe fits into the coronavirus situation in Europe and also about the backbiting sort of authoritarianism related to it?

Mattias Matthijs: That's a very good point. I mean, I just noticed this morning that Viktor Orbán is now very actively having a new propaganda campaign, where he's saying, "Look, Brussels was very happy to send a Soros inspired lecture on democracy and it's backsliding. But we have yet to see medical supplies or any single ventilator, single help when it comes to dealing with this crisis." So I've been wondering about this from the beginning of this crisis, whether this would play in the hands of nationalist leaders or not. And I think on the one hand, Europe could do a lot of good in coordinating the response and in solidarity. But on the other, it's also a situation where leaders, especially in Poland and in Hungary, could point towards the open borders that have caused this to spread much too rapidly within Europe. And then, now the fact that they have to take these measures, that they wouldn't have had to if there were a more controlled movement, which is always what they wanted. So I think it's a double-edged sword for them. But I think as Charlie's pointed out, I mean you see in most countries, they're rallying around the flag and kind of supporting its national leadership. I think this will play out just as much in favor of Orbán and Kaczyński in Poland as it will for Boris Johnson and Emmanuel Macron in France.

Karen Donfried: Terrific. Let's go ahead and bring in the next question.

Operator: Thank you. We'll take our next question. Caller, please go ahead.

Charles Robertson: This is Charles Robertson from the Episcopal Church. I'm curious as to what might be the role in this situation of nongovernmental groups that work beyond borders, such as religious organizations or faith groups? I'm thinking about the refugee situation that already was critical before the coronavirus crisis, And in the US context, six of the nineofficial refugee government (ph 0:43:18.2) agencies happen to be faith-based organizations. In relation to malaria prevention in sub Sahara Africa in recent years, faith-based groups were used to help with education and prevention efforts, all because of their reach, being able to get into nooks and crannies that sometimes the governments can't easily get into. What role might we be able to better play in maybe in a more creative way than simply beyond prayers in terms of this current crisis?

Charles Kupchan: Well, I think if you look at what's happening on the ground in places like Italy and Spain, NGO's and civil service organizations, and just people coming together are making a big difference. Is it a difference that is a game changer? No, that really has to come from states and massive amounts of investment. But clearly, community level organizations are playing a big role. I do worry that on the other issue that you brought up, refugees, migration, that this crisis is so all consuming and will soak up so much of the EU's budget, that other programs that were in trained, may be shortchanged, including on the refugee front and the efforts to keep asylum seekers in Turkey will tighten the efforts to turn them back and send them back to Libya will tighten, and all this will probably happen with fewer resources, because rightly so, the governments are going to deem their top priority to be dealing with the pandemic virus rather than sending more money to relieve suffering in Libya and Greece. And that's generally a problem that we're seeing in many different countries where for example, people who are ill with terrible diseases are essentially not being seen because hospitals are being overwhelmed with coronavirus patients. 

Mattias Matthijs: Yeah, there's been a very active involvement, for example, Doctors Without Borders in Europe. And so, there are international NGO's that you see play. But going off on Charlie's point about refugees, what worries me a little bit is that many refugees who currently are in Europe, are in refugee camps, right, or in like, you know, closed environments with like 400-500 at the same time. And I just really worry that if there's one outbreak of coronavirus in one of those camps, that then the potential to exploit xenophobia and anti-refugee sentiment amongst native populations to then show, so now our hospitals have to be used to help refugee populations rather than our own populations. So that's what I mean about zero sum nature of this crisis, right? If resources are limited, and there's only a certain amount of hospital beds and ventilators and all those sort of things, then there's going to be this kind of strong reaction of native populations to say, "We need to be helped first." I mean, it hasn't gotten to this. But I do worry, especially if I hear how fast this virus can spread, that this could be a real possibility. 

Charles Kupchan: And it's worth noting that when it comes to treatment of refugees, even before this crisis was in full swing, the EU really did look the other way on the border between Turkey and Greece, when some (inaudible 0:47:18.9) some unsavory events were taking place, including violence against refugees that were trying to cross the border. 

Karen Donfried: Thanks to you both. Let's go ahead and take the next question.

Operator: Thank you. We'll take our next question. Caller, please go ahead.

Stephen Flannigan: Hello, this is Stephen Flannigan calling from Rand. I had a question about - you started to get into some of the institutional discussions and impact. It struck me that - I wonder if you could give us a sense of the EU's response thus far in terms of the collective actions, sharing of supplies and medical goods that could be collected and distributed through various EU instruments. It seems to be lacking. And of course, NATO - the Spaniards - I know had asked for help from NATO, and NATO made clear that it wasn't in a position to do much in that vein other than distribution, and it did respond by providing some airlift support, ironically using some of the barred Russian planes to deliver Korean-origin goods to Romania. But I wondered how you think that some institutional impact or institutional impact and credibility of these institutions on the response to the coronavirus?

Mattias Matthijs: Yeah, I would say that - I mean, as always, initially it scales, there's a national reflex. The EU - people are asking what's the EU doing to coordinate this and so on. But I mean, I don't think it's quite that well coordinated yet at the EU level, even though they did just establish the EU Center for Disease Prevention and Control after (inaudible 0:49:23.7). And so they're doing these things, usually in response to crisis, but I think as many Americans probably rightly point out, the EU is very good at establishing new centers and headquarters and so on, but putting real money behind it and making it work is a different story. But there's all kinds of uplifting stories about European solidarity taking place. I mean, I believe it was Stuttgart, they were taking - there were hospitals that were taking Italian patients from the Lombardi region that were being flown in the last few days. So I think you'll see there's more kind of on a national basis, where there's the countries that have more capacity to deal with this, will hopefully be kind of - make this available. And it's true. I mean, the north-divide in Europe is real in the sense that the north is richer. They have better health systems. They have more capacity. The question is can they contain it for their own populations, so they can do more on that front. But clearly the problem remains that public health is a very staunchly guarded national competency, so there's only that much coordination the EU can do. But it seems to me, if what I hear talking to people in Brussels and so on, is that this is starting to  - that they're starting to get more serious about this. Also for the EU, this is an existential threat. I mean, they can't afford to be shown to be doing nothing to their members. So I expect there to be kind of incremental things to be done. But as Charlie pointed out earlier, it's probably not needed right now as incrementalism, but about a big, large commitment that would bring back calm, both amongst its memberships' populations, but also among financial markets. 

Charles Kupchan: Yeah, I think, Steve, you know, the start was slow. The trend lines are positive. I haven't seen any hard data on number of masks or numbers of ventilators that have crossed internal EU boundaries, but anecdotally, one hears that those sorts of sharing mechanisms are increasing in size and in frequency. But again, I haven't seen anything that would be the kind of concrete indicator that's measurable.

Karen Donfried: If I can just follow up with both of you, do you think if we see the EU stepping up its ability to coordinate on these public health issues internally, that that would be to the detriment of the European Union's neighbors? And what's sparking this question is the Serbian president, Vučić, last week made this comment about European solidarity does not exist, after the EU toughened restrictions on the export of medical equipment to countries outside the EU like Serbia. And he said, "I'm just gonna go ahead and seek help from China instead." So what are the implications of that for the EU's immediate neighbors?

Charles Kupchan: Well, you know, as I said, I think early on for the foreseeable future, to the degree that the EU gets its act together, it will be inwardly focused, and that focus will come at the expense of programs that have been focused on the neighborhood and other external efforts, although I would point that the EU did recently open accession talks with both Albania and North Macedonia. So it's not as if it is kind of shutting down its entire external side. And the other thing I'd point out, Karen, on this is that shift was part of a shift in EU policy in which it was attempting to address the problem that Steve Flannigan was getting at. That is to say national hoarding at the expense of EU member states, I think the idea was if we created a ban on the exports of these things, then they will more easily be transferrable among member states that need them.

Mattias Matthijs: Yeah, it would be a nice gesture of the European Union to treat its accession members, right, the ones that are going through negotiation to join in the same way as they treat their own. And that's where it's striking, I think, if you are North Macedonia, or if you are Albania. You get treated worse; you're joining, you're applying to join, you want to join. You get treated worse right now than the United Kingdom that has voted in a referendum and then voted for Boris Johnson, 12-12-2019, to leave the European Union. So I think that for the EU, this is a little bit a PR disaster, the way this is playing out in its neighborhood, that's for sure. 

Karen Donfried: Great. Let's take one more question.

Operator: Thank you. We'll take our next question. Caller, please go ahead.

Male Voice:  Hi, my name is (inaudible 0:55:04.2). The question is regarding gun sales. I've seen a spike of gun sales in the United States. I'm not really familiar with the sort of laws as it pertains to Europe. I know it's complicated. Some have it. Some don't. But could you maybe perhaps talk about that a bit, and how that's sort of taking shape in light of this coronavirus pandemic?

Mattias Matthijs: Charlie, do you want to talk guns?

Charles Kupchan: Because you're an expert in that issue, Mattias, I think I'll turn it over to you.

Mattias Matthijs:  Yeah, I don't think we have to worry about kind of all kinds of groups or individuals arming themselves to the teeth  with guns. I mean, in every - Karen can speak to this as the President of GMF, but every GMF transatlantic value survey I've seen is that all of Europe, when it comes to guns and death penalty and things like this, is far away from the way theUnited States deals with this. That being said, I mean, as we discussed earlier, I mean, I would worry in situations where, I mean, everybody goes into quarantine. I mean, this is all fine for families and relatively well off neighborhoods that have (inaudible 0:56:22.5) that can afford it, but in poorer neighborhoods, I mean, there's vulnerable people who live on their own, who the police can't be everywhere at the same time. And so, I do worry, not just about kind of political repercussions and whether it's riots on the street, but I would worry about an increase in crime and an increase in just kind of - I worry for the safety of the most vulnerable people. And so coming back to the question of what NGO's can do, I mean, a lot of older people, and Europe is an aging continent. I mean, they're the biggest group at risk. They're the most terrified. I mean, in Italy, people over 70 years old, who have the virus, close to 20 percent of them have died at an astonishingly high rate. So they live in fear. They often live by themselves. Their families can't go and visit them. If NGO's - I mean, I don't know what they could do, because they can't go and visit them either. But it does worry me for the safety of the most vulnerable populations, and it's not clear that states can do much about this, because again, they have limited resources even on their police forces and so on. But I wouldn't worry that Europe is gonna go the same way as the United States, because I have seen similar reports here in this country, where I think one of the big reasons why there is this $2 trillion stimulus is so that people continue to keep their paychecks and so on, so they don't have to resort to other means.

(Crosstalk 0:57:57.6)

Charles Kupchan:  - gets to the broader question of social decay and social unrest, which both of us have touched on. And I think our message right now is not likely, not in the cards for the near term, but a lot depends on how big and how bold the steps are that are taken here and on the other side of the Atlantic, because if the right steps are not taken, and this does get worse, then yes, I think down the road in a few months, you are talking about potential social unrest. That's why these weeks are so critical.

Karen Donfried: Well, my clock is showing that we're almost at 3, and I want to use our last 30 seconds just to say thank you to Charlie and Mattias. That was such an impressive tour de force, very informative, thought provoking. And  I'm going to ask all of our members to join in virtual applause for Charlie and Mattias. Thank you so much.

Mattias Matthijs: Thank you, Karen.

Charles Kupchan: Thank you, Karen.

Karen Donfried: And thanks to all of you who took the time to join the call. Stay healthy and stay safe.  Thanks.

Mattias Matthijs: Bye-bye, everyone.

Charles Kupchan: Bye.

Operator: This concludes today's call. Thank you for your participation. You may now disconnect.