The announcement by German Chancellor Angela Merkel and French President Emmanuel Macron of a 500 billion euros COVID-19 EU recovery plan has been heralded as monumental and welcomed by Italy and Spain.

The European Commission commended this progress and released its own “Next Generation EU” recovery plan that supplements 500 billion euros in grant money with an additional 250 billion euros in loans.

These recovery proposals, however, have come under criticism from different corners of the EU.

The “frugal four” countries of Austria, Denmark, the Netherlands, and Sweden have countered with their own recovery plan that puts an emphasis on loans without mutualization of debt.

There has also been some splintering in the “Friends of Cohesion” group with Czech Prime Minister Andrej Babiš warning that it would be “unfair to be penalised for being successful”. He was, no doubt, referring to concerns that the crisis could be used to redirect EU funds from the East, where there have been relatively few cases of Covid-19, to the ravaged South.

Projections indicate that the economic ramifications of the pandemic, unlike the health impact, are likely to be more evenly distributed across the continent, with some regional variation depending on the sectoral distribution of individual economies.

European Green Deal: vehicle for compromise

While disagreements have proven pervasive on debt sharing, the interests of both the frugal four and the friends of cohesion group find a common ground with regard to an EU ecological transition.

The frugal four, Italy, and Spain, in fact, all signed onto an April open letter of 17 member states calling on the EU to adopt the Green Deal, aimed at achieving a 50 to 55 per cent emissions reduction in the EU by 2030, as a framework for a comprehensive Covid-19 recovery.

In that joint piece, member states advocated for investments in areas such as ‘sustainable mobility’ and ‘renewable energy’ to help stimulate economies, create jobs, and protect biodiversity.

The Green Deal has found little vocal support in Central and Eastern Europe (CEE), though, with only Latvia, Slovakia, and Slovenia joining the letter. The automobile-oriented and coal-dependent region has at times been sceptical about its costs.

Poland has been especially boisterous and was the only EU country not to agree to the 2050 zero emissions target at the European Council’s December 2019 meeting.

Amid COVID-19, this opposition has stiffened with Deputy Minister of State Assets Janusz Kowalski calling for the EU to abandon its existing Emissions Trading Scheme to support the economic recovery ahead.

There are some indications of movement though. While Czech Prime Minister Babiš, in the initial aftermath of COVID-19, had remarked that “Europe should forget about” it, a government announcement on 25 May declared support for the EU climate neutrality goal.

The EU Commission’s proposal includes 40 billion euros for the Just Transition Fund, over five times the amount initially planned, which could support CEE countries in weaning their economies off fossil fuels.

The CEE countries will need to be pragmatic and recognize the writing on the wall. If they are willing to compromise, they can secure vital funding that will facilitate industrial diversification and long-stifled research and development sectors.

Refusal to negotiate on the environment, meanwhile, could lead to a COVID-19 recovery plan that leans more towards the interests of the South and leaves the CEE region in the lurch without a viable long-term economic transition strategy.

This is, in fact, a rare occasion where Western European governments have shown an interest in opening up the funding spigot – failure to engage would be tantamount to squandering a major political opportunity.

A common green future

The South is adamant that grant-funding be central to any European recovery plan. The frugal four are equally insistent that loans form the basis of any agreement. The CEE countries are open-minded to both approaches but want to ensure equity.

Rather than meeting where they disagree, a more prudent strategy would be to use the Green Deal consensus as a framework for brokering an agreement.

The Green Deal, in the form of the Just Transition Fund and a climate bank, already has mechanisms for alleviating economic grievances across the EU but they need to be adequately financed.

It can be packaged in a manner that is palatable to both governments and populations. The 2019 EU elections, notably, demonstrated the common resolve of European societies, especially youth, in combating climate change, included in Slovakia.

In light of the pandemic, moreover, all political leaders should recognize the gravity of the current situation and heed the fact that their constituents want to express solidarity. A majority of Germans, for example, are on board with the proposed recovery plan.

An ecological-oriented recovery, importantly, would also put the EU on course towards a “prosperous and resilient” economy that can stave off the exorbitant costs of climate change forecast by the Intergovernmental Panel on Climate Change.

It may prove to be the only politically satiable path forward for warding off devastating unemployment, a permanent loss of confidence in the EU, and an accompanying rebound of populism that could rupture the EU.