Interview 3: Anthony Gardner, former US Ambassador to the European Union

Anthony Gardner served as United States Ambassador to the European Union from 2014 to 2017. He is currently a Board member of Iberdrola as well as Brookfield Business Partners LP, and Senior Adviser to Brunswick Group. Anthony is also an adviser to the Bill and Melinda Gates Foundation and a member of the advisory boards of the Centre for European Reform, the German Marshall Fund and the European Policy Centre.  Anthony is currently locked down with his family in London.

What do you think will be the impact of COVID-19 on the EU economy over the next year?

  • The figures already show a dramatic drop in Q1, driven by catastrophic fall in demand. I expect Q2 figures will also be catastrophic, although there is hope that economic activity can slowly return over the summer.
  • One of the insidious aspects of the crisis is that it has asymmetric impact and therefore strains the EU’s capacity for solidarity. There is a risk of short-term thinking leading to dangerous long-term consequences.
  • I worry in particular (as does everyone) for those EU countries that are particularly reliant on services, especially tourism – Italy among them. Italy entered the crisis in a particularly vulnerable position. Some EU member states are underestimating the potential for real trouble in Italy, not only much higher euro-scepticism but also a debt crisis.
  • There will very likely be a turn toward greater economic nationalism. That can be fine if it focuses on protection, rather than protectionism. I worry about an excessive reaction to cutting back on global supply chains and a renewed effort to build up national champions.
  • The role of member states will grow, at the expense of the European Commission and at least some of its agenda. The role of governments in the economy will clearly be significant for the foreseeable future.

How will governments both sides of the Atlantic manage to shore up their economies and deal with declining tax revenues and ballooning debt?

  • There will be an intensive search for new sources of revenue, including further pressure on the use of tax havens and an acceleration of plans to implement a digital sales tax.
  • Central bank balance sheets will remain significantly higher than in the recent past. They are proving to be the most effective crisis-management tool.
  • There may be inescapable pressure to reform pension systems.
  • Governments may move to inject equity into companies, especially in strategic sectors, to boost balance sheets and prevent unwanted takeovers.
  • There may be inescapable pressure to prioritize a quick economic rebound, even at the cost of measures to protect the environment. Competition law and privacy law considerations may also take a back seat.

What is your view of the way in which the EU and the USA have responded respectively?

  • The reaction of the US under Trump has been catastrophic for the reasons everyone has witnessed: wilful blindness by the White House, followed by a desperate attempt to blame everyone else, including the WHO and Europe.
  • After an unfortunate start, EU member states are now beginning to avoid the worst nationalist impulses and understand that the crisis requires a European coordinated response (as part of a global response). The European Commission is doing what it can within the limits of its powers. Indirect risk-sharing through EU debt issuances guaranteed by increased head-room in the EU budget backstopped by member states would have a meaningful impact and perhaps is politically feasible.

What impact on transatlantic relationships do you think the pandemic will have?

  • If Trump is re-elected, the impact will be extremely negative. It will not be soon forgotten that Trump immediately pointed the finger at Europe and sought to acquire a German vaccine manufacturer in order to obtain exclusive rights to a vaccine.
  • If Trump loses, we have an opportunity to fix some of the damage, including:
    • Immediately set up a US-EU pandemic response effort to cope with this crisis and prepare for similar crises in the future.
    • Immediately strike a limited trade deal, perhaps eliminating tariffs on industrial goods trade.
    • Immediately announce re-entry into the Paris Accords, the Iran nuclear deal and engage with the EU on WTO reform, specifically targeted at forcing China to modify its unfair trading practices.

What will you do differently in your life after the virus?

  • I will certainly try to travel less and use more remote communication technologies.
  • I remain very concerned about secondary and tertiary infection outbreaks and downside risks in the markets.
Anthony Luzzatto Gardner