Italy was effectively abandoned during the crucial early stages of the pandemic. As the death toll soared, furious Italians filmed themselves burning the EU flag, and Russia and China seized on the disunity to send equipment, some of which was later found to be faulty. Brussels eventually recognised the signs of rebellion and arranged supplies and emergency cash for Rome but the damage was done and the results could prove seismic. "Those countries that did not respond may have been worried they were about to be hit themselves, but the optics were absolutely atrocious and made even worse by the fact at the same time, China and Russia were taking advantage and sending medical teams and medical treatments," says Luigi Scazzieri, a research fellow at the Centre for European Reform. Italian and European Union flags hang from windows in a Rome street. Credit:LaPresse "These were basically public relations stunts, of course, however the problem for the EU is that perceptions are shaped quickly."

The snub poured fuel on a smouldering fire in Italy, where euroscepticism has been on the rise in the decade since the European debt crisis and an influx of migrants pitted countries in the south against those in the north. Those same dynamics are playing out 10 years later as the coronavirus crushes Europe's economy and pushes Italy's already fragile balance sheet towards the point of no return. Old wounds are being reopened. The Schengen Agreement, which is meant to permit frictionless travel inside the EU, was quickly cast aside as countries sealed borders or introduced stringent checks. State-based solutions won out over a collective response to a shared crisis. A particularly severe rupture is now emerging over whether to embrace controversial "coronabonds" as a longer-term measure to repair the continent's shattered economy. The coronabond fight is getting ugly and has already compounded the fallout from Europe's failure to respond quickly to Italy's plea. Some political leaders and experts even fear the brawl could cause Italy to step out of the eurozone — and possibly the EU altogether — in favour of a closer relationship with an opportunistic China and Russia.

Coronabonds would allow the EU to jointly raise debt, which would be shared across all member countries. Raising debt with the might of much healthier balance sheets in the north would drive down the individual borrowing costs for countries in the south which are still highly leveraged following the 2010-2012 debt crisis and may struggle to get the money needed to properly fund the coronavirus recovery. Loading Replay Replay video Play video Play video About 135 per cent, Italy's debt to GDP ratio is the second highest in Europe and one of the largest in the world, and there are real fears it and perhaps Spain could collapse under the crushing weight of the pandemic, triggering a full-blown debt crisis that engulfs Europe and jolts already-hammered global markets. Lower borrowing costs and easier access to money could prevent that catastrophic outcome. Joint debt would mean countries in the north pay more in borrowing costs and carry a higher degree of risk than they do now, and it would be seen by some taxpayers as nothing more than a wealth-transfer scheme. Opponents of a coronabond scheme also make the compelling argument that it would take years to design and implement. The coronabond approach was floated during the debt crisis under the badge of "euro bonds" but the plan was shot down by countries in the north who did not want to be on the hook for the failures of the south. German Chancellor Angela Merkel famously said then that she would never accept common debt as long as she drew breath.

A coalition of the "frugal four" — Germany, the Netherlands, Austria and Finland — are again pushing back hard against new enthusiasm for shared debt. Dutch Finance Minister Wopke Hoekstra inflamed tensions by sensationally suggesting an investigation might be needed into why Spain and other countries were not in a sound financial position to respond to the COVID-19 outbreak. Portugal's Prime Minister, Antonio Costa, described those remarks as "repugnant". Enraged Italian mayors even took out an ad in a conservative German publication to remind Berlin that Italy, Spain and others forgave much of Germany's debt in the wake of World War II. "Dear German friends, remembrance helps one make the right decisions," they wrote. Conte, whose response to the devastation in Italy has led to soaring poll popularity, is all in on the coronabond idea and is backed up by Spain's Costa, as well as the leaders of France, Belgium, Greece, Spain, Ireland, Slovenia and Luxembourg.

"We're not in the process of writing an economic textbook here, we are writing a page in history," Conte said in a rare interview with German television. "We are being called to manage a challenge of epic proportions and find a way out of this devastating emergency." Loading Jerome Roos, a fellow in international political economy at the London School of Economics, says the approach of the frugal four is misplaced and does not reflect the gravity of the crisis. "What they fear is that a coronabond would essentially induce moral hazard because it would cause these countries in southern Europe to continue to spend more than they earn and to basically use the subsidy from the north — in the form of lower of borrowing costs — to maintain that profligate behaviour," Roos says. "That's obviously nonsense because this is not about profligate behaviour — it's about responding collectively to a common crisis."

He also warns the unwillingness of the north to accept slightly higher borrowing costs under a joint debt instrument could backfire in the long term through the demise of the euro and hard-right politicians using disunity within the EU to push the case for its disbanding. "The point is that disintegration of the eurozone would be so infinitely more costly to Europe," Roos says. "It would make that slight increase in borrowing costs and increased burden and risk-sharing look really insignificant. A breakup would be catastrophic." Matteo Salvini, the firebrand former deputy prime minister of Italy, is waiting in the wings to capitalise on Italy's dissatisfaction with the EU's response. Even Conte has hardened his stance against the EU over recent days and a future centrist government could come under real pressure to retaliate. In the north, Dutch far-right party leader Geert Wilders is also reviving anti-Euro sentiment by arguing that too much taxpayer money is being funnelled to the south. "That's the narrative, and the risk of course is that you will end up with this intensified contradiction where Europe's leaders end up playing into the hands of both these types of politicians," Roos says. "That might lead to a situation where the eurozone could actually break apart if there's no way to find that common ground and express solidarity in a much more serious and institutional level."

On the medical front, Europe has stepped up its game after the initial stumble, and Germany, France and Austria have now sent millions of masks and hundreds of ventilators to Italy. In a less-than-subtle attempt to counter Beijing's "face mask diplomacy", glossy memes on the EU's social media accounts note Germany and France combined have "donated to Italy more masks than China". A section of the EU website has been set up, cheerfully titled "snapshots of European solidarity". The European Union is under huge strain as coronavirus sweeps across the continent. Credit:Bloomberg The Centre for European Reform's Luigi Scazzieri notes that the EU also hasn't been entirely sitting on its hands over fiscal policy, citing a relaxation of deficit rules and a mooted €100 billion fund to support workers in hard-hit communities. "But I would say this is an attempt to deflect attention from the bigger disagreements," he says. "When you think that most of Europe's economy is not producing anything for months, the scale of this downturn will require enormous amounts of guarantees and funding, and €100 billion compared to the size of the economy is absolutely nothing. "My fear is that enough will be done to keep countries like Italy solvent, but not enough will be done to change their political trajectory. Similarly to what happened in the way Europe rectified its initial missteps on sending medical help to Italy, the same might happen economically but you may have aid to Italy but that is too late and that results in a strengthening of eurosceptic forces."