Will EU Lockdown Easing Introduce New ‘Weimar Republic’?

The European-wide lockdowns are set to ease, but for some the end of the entrapment will have different consequences than for others. There was an editorial in the British Financial Times this week urging liberalism, which was already under attack before the covid-19 lockdowns, to fight back.

That call will indeed be heard more often than not in the months to come, as the lockdowns seem to have heightened the difference between rich and poor, both in Europe and the US, and could have dire political consequences in various major EU states.

Various riots and protests in the Netherlands, Germany, Belgium and France could be seen as a first sign of what is to come.

Rich work from home while poor get laid off

Whereas some countries fared better (Germany, Sweden, Denmark) than others (Spain, France, Italy, the UK), the overall consensus is that all of them will have to deal with a large part of their population out of employment for months if not years to come due to the coronavirus lockdowns.

The European horéca (hotels, bars and restaurants) sector seems to take the hardest hit and if their venues will ever be allowed to reopen, it is clear that the social distancing guidelines will assure that a room filled with bustling and buying customers will be a distant dream for any pub owner in continental Europe.

This however also means that 50% of those with a low paying service job is out of an income as well. The shorter US social security system might make it more obvious that the numbers are severe, but European unemployment numbers will soon catch up.

And thus the lockdown, which was decided upon by mostly liberal politicians who could easily switch an office building for a home desk with a laptop, will have created a new underclass of people who are faced with an economically grim reality.

Belgium introduces an Ostend underclass

The worst example thus far came from the centrally positioned European state Belgium, which houses the European Commission and NATO headquarters. There, the people with a second residence, mostly at the seaside, are able to visit it as from this week, whilst the poor in the Brussels suburbs who haven’t been outside of their apartment for months, bar an occasional walk to the park, are not even allowed on the beach.

To make matters worse, the Ostend (the largest city on the Belgian coast) mayor has now presented a plan for the summer which prioritizes rich over poor apparently. Access to the beach will be prioritized for people living in coastal cities, followed by people with a second residence and those who are able to afford a room in a hotel. Those that need to drive down from their city to the beach for a day will not be allowed on the sandy shores. Discrimination much?

In essence, the result of the Belgian lockdown is this: if you are poor, then you’ve lost your job, you need to stand in line at the supermarket, the pub is closed and you can’t go to the beach; if you are rich, then you work from home on your laptop, you order your food online (and are willing to pay extra), you sit in your garden and go to your second house on the beach during the weekend.

The liberal government has easily handed a major vote share to the extremist parties for the next election.

French parliamentary majority lost

Meanwhile, over in neighboring France, President Macron isn’t faring much better. This week his political party En Marche officially lost their parliamentary majority for the first time since his rise to the presidency.

Although he is still backed by smaller parties to get things moving, he could become a sitting duck by the time the next Presidential Election comes along. With Marine Le Pen looking strong shouting from the sidelines and a poor population out of work and angry, it is easy to see who will be the political victor post-lockdown.

EU starts printing Euros

It is therefore all the more logic that the European major powers (Germany and France) came together this week and announced a plan to create an additional €500bn of spending power, via EU-level borrowing to distribute money in the form of grants.

If German Chancellor Ms Merkel and French President Mr Macron can get the entire EU-27 on board, it will move markets significantly… and might just be the start of a massive stimulus plan to keep the newly poor on board with the European project.

Weimar Republic solution

The rich class will continue to work from home whilst their taxes will be used to hand out stimulus payments to the poor. To finance this, the ECB will turn on all their money printers.

This will however dilute the Euro as the budget spurs out of control and then, the EU could be looking at another version of Germany’s infamous ‘Weimar Republic’.

Back in the 1920s, Germany was faced with economic hardship and had never really recovered from both a lost war (World War I) and a pandemic (The Spanish Flu). The then government, known as the Weimar Republic, also resorted to the money printers to keep the economy going, and soon, German money had some extra zeros added to it.

Already I wonder whether Europe is heading in that direction now that the pandemic lockdowns are easing and the first sign of money printing become obvious.

An uneasy afterthought is also that this time delivered the most extreme politics Europe has ever seen, as in the 1930s it became clear that the Weimar Republic solution of money printing didn’t really work out. Interesting times indeed.

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