The coronavirus will eventually run its course. But today, our goal must be to minimize fatalities. Other considerations should be put to the back of our minds. That said, we will be more confident in taking the decisions we must take today, if we know that long-term issues are part of our thinking process.

I was EU Ambassador in Washington when the financial crisis broke. The G20 was convened, including China. It agreed guidelines for global recovery. China helped boost the global economy through massive borrowing for infrastructure. The G20 must come together again and trade disputes should be put aside until the health crisis is over.

Technology

We are fortunate to have modern IT and internet available to us. If coronavirus had hit the world thirty years ago, we would have been less able to cope with self isolation. Working from home would have been impossible and tracing of infection more difficult. The financial industry, instead of working from home, would have simply shut down. The virus vindicates the decision to spend substantial sums of money on rural broadband.

On the other hand, technology has made us more dependent on things coming from far away. Even the food sector is heavily globalised, and if borders are shut down, people may go hungry or rationing of some foods might have to be introduced. This may not be a great likelihood in Ireland, but there are foods for which even Ireland is wholly dependent on imports.

In recent days, some countries in Europe have closed or increased control on their borders and have contemplated banning exports of some items. This is not the way to go. If it were to persist and shortages were to occur, bitterness between EU countries could increase. This would undermine the permissive consensus on which the very existence of the EU rests.

Importance of Single Market

The EU Single Market is a vital interest for Ireland. A recent study by the Bertelsmann Foundation showed that, while the Warsaw region had gained almost €3bn from being in the Single Market, two of the poorer regions in Poland gained only €300m. This is in stark contrast with southern and eastern Ireland, which had gained €7bn.

There are wide divergences of interest and deep inequalities here, which European politics has struggled to cope with. Coronavirus will bring them to the surface in a new way. People may also have unrealistic expectations of what the EU can do about the effects of coronavirus.

EU limitations Yes, the ECB can buy government bonds and prevent countries going bust in the short term. But the EU has no independent power to raise taxation and no right to borrow.

It is at national level that the financial battle must be fought, because it is only at national level that taxes can be raised from people and debts incurred in their name.

Indeed, the ECB can only do as much as it is doing because there is an assumption that the member states of the EU, with their taxing powers, will stand behind it.

Coronavirus, if it closes down economic activity for a prolonged period, will also test the viability and solvency of some of Europe’s states. In global terms, Europe’s states are mostly small, compared to China, the US and India. But their banks are large and some have not fully recovered from the 2008 crisis. Those in the euro cannot devalue. If they act collectively, the countries of the EU are big enough to spread risks and maintain confidence, but individually they are too small.

All European states will have to dramatically increase their levels of borrowing if they are to give income support to those losing their livelihoods, with no definite end in sight. This is justified. Unlike the banking crisis, the coronavirus pandemic is not the result of policy mistakes that need to be discouraged for the future. There is no moral hazard, as the economists would put it.

Italian debt

Take the case of Italy. It has a debt of 148% of GDP, proportionately the largest outbreak of the virus, and a Eurosceptic electorate. Italy must get the help of every other EU country to finance the draconian steps it has taken to stop the spread of the virus. The sort of minimal – and grudging – assistance given to Italy by its EU partners to deal with the refugee crisis, will not be enough.

It is good that ECB bond buying last week brought the interest rate the Italian government must pay on its bonds down from 2.4% to 1.9%. That level of support will have to be sustained. The negative reactions to this in some northern European countries suggest that they do not understand EU solidarity. They seem to have forgotten that Holland and Bavaria are among the regions that gained most from the EU Single Market, according to the Bertelsmann Foundation study.

Coronavirus will cost economically

We know the emergency will end, but not when it will. The additional debts, great or small, will eventually have to be reduced.

Nobody wants any other EU state to find itself in the situation Greece is now in, with debts everyone knows it cannot repay. That sort of self deception will not work a second time.

How is this to be done? Broadening the tax base to include all income and spending may eventually have to be contemplated, unless inflation comes to the rescue and devalues all debts. Interest rates will have to stay low for longer, notwithstanding the real difficulty this causes for private pension funds and savers.

Brexit – time to extend transition

And then there is the chronic problem, that never quite goes away – Brexit.

If ever there was a need to take time out from dealing with the intrinsically long-term challenge of Brexit, it is in the wake of the outbreak of coronavirus.

The UK has left the EU and is not coming back. The only remaining question is whether or not there will be a trade agreement between the EU and the UK on 1 January next year.

The way things are going, there will be no deal. So from the 1 January 2021, we face full border controls and tariffs on goods going from Britain to the continent and both parts of Ireland. Food supplies in particular will be disrupted. It will be a double whammy, on top of coronavirus.

The timing will be dreadful. Those responsible will not be easily forgiven. Unlike the virus, the cause of this shock will be purely political.

The solution is simple. Postpone the end date of the trade negotiation to the end of 2021 or, better still, to the end of 2022. For that to be done, all that is needed is for the UK to amend its withdrawal legislation to allow for it.

It is time to ask Boris Johnson to decide if there are some things even more important than “getting Brexit done” to an artificial timetable. Circumstances have changed. He can do it. He has the majority, and the authority.