Next Generation EU: How to spend it…
‘A high-risk gamble’ is what reputed economist Jean Pisani-Ferry calls the EU’s recovery fund: it could make a real difference… but failure is certainly still an option. I’m afraid I agree, and it will all depend on how Next Generation EU is set up and governed.
There is always a risk of European support being ‘Too little, Too late’ — though the size of the Recovery and Resilience Facility on top of the MFF is nothing to frown upon — but even more important is how the money is spent.
Here’s what I take away from previous years and crises:
First, EU money only really delivers when other money would not be forthcoming, as is the case for cross-border investments, cash-strapped governments and projects where EU funding and guarantees are the only way to leverage private investment.
But, much to the European Parliament’s dismay, the deal struck in the European Council made cuts to precisely those areas like science, Erasmus or greening projects, preferring national envelopes instead.
Second, EU funding helps if, and only if, it boosts structural changes: low productivity, structural unemployment, inequality, reliance on carbon-intensive technologies or the effectiveness of public administrations, business climate and legal system. This demands what Pisani-Ferry calls ‘the right balance between intrusiveness and indulgence’.
Yet that is exactly where the Commission has been ever more lenient in recent years, pulling the teeth of the system of oversight and pressure created after the financial crisis, the European Semester.
The proof of the pudding is in the politics: with governments being very protective of their supposed ownership of the recovery fund, the ‘contractual’ thinking Pisany argues for is not just absent, but deliberately left out of the Council package. The so far underwhelming response to the Parliament’s rule of law concerns show that weak governance could undo many of the benefits the MFF and Recovery fund might have. Giving scrutiny responsibilities to national governments and parliaments could set us up for years of painful and poisonous debates, without any means of finding a synthesis that benefits the EU as a whole.
We need to guarantee a role for the European Commission and Parliament to safeguard the European interest, and a dialogue between the two to keep the Commission on its toes.
My third worry is over own resources: if we fail to agree on a system that generates sufficient own resources quick enough, the difference would end up being paid by taxpayers, through their governments. In terms of both public opinion and economic effects, this could severely damage any benefits we might have generated in the meantime. So we need own resources and we need them now.
They say there is nothing more dangerous than trying to leap a chasm in two jumps. As before in EU history, we have set in our jump. Now it’s our responsibility to make sure we land safely.
