Europe is facing an existential crisis. At the height of a pandemic, the European Union lost one of its most valuable members – the United Kingdom. Many compared Brexit with Trump’s election in the United States, perhaps because the two events happened in the same year, at a few months’ distance. However, Trump is gone, but Brexit is permanent.
Wounded by Brexit, the European Union was forced to show unity, cohesion and to sing by the same voice. As such, the members put together one of the most ambitious fiscal packages in the world and issued common debt – steps deemed as unthinkable in the E.U. only a few years ago.
On the same page, the European Commission negotiated the buying of potentially effective vaccines against the coronavirus on behalf of all European Union citizens. The aim was to avoid rich states buying more and faster than poorer states, as it will affect the very pillar the European Union is based on – unity, equality – European.
Tensions In Brussels on Vaccine Rollout
Tensions started to mount over the weekend. Some pharma companies announced “delays” in the delivery process for various reasons. One said that it needed to adjust the production line for increased output. Others simply announced that fewer doses will be delivered.
However rumors have it that some pharmaceutical companies have negotiated better prices than the ones with the European Union. Thus, they favored deliveries to other countries in other parts of the world that paid much more.
The problem here is twofold. First, the European Union pre-financed the development of the vaccine. Second, it pre-financed the production too.
Faced with exactly the sort of problems it was trying to avoid in the first place, the European Commission went a step further and “nationalized” the pharma companies’ output. Maybe the word is too strong, but it effectively proposed to the 27 member states that an export transparency mechanism will be put in place as soon as possible. More precisely, before allowed to export, the pharma companies producing in Europe must provide a list with the destination and the contract.
Obviously, this has the potential to escalate further. For the currency traders, and especially for the Euro traders, it spells troubles. Not only that it delays the “potential” economic recovery, but it threatens the very unity the E.U. is built on.
The population already blames governments and Brussels for the poor infrastructure for vaccine rollout. No one understands how come the United Kingdom, Israel, or the United States are so far away in vaccinating their population while Europe is stuck at 2%. Now, there are no vaccines in the pipeline.
If we add to this the European lockdowns in Germany or France, the picture on the Euro looks grim for the period ahead. Perhaps it is time for the EURUSD to move below 1.20?