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21. Reforming European Economic Policies

Author:
Olivier Marty and Damien Ientile
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
Robert Schuman Foundation (RSF)
Abstract:
Despite the European Union's ambitious response, the current crisis is a stark reminder of a nagging problem: the challenge, in practice, to the principles and concepts governing major European economic policies. This situation can be seen in monetary policy, budgetary rules, trade policy, competition, the European budget and the structure of the euro zone. It fuels resentment between Member States and populations and, paradoxically, it encourages economic divergence. It is also undermining the legibility and credibility of European action in the eyes of the public. It therefore would seem advisable to reform the European economic framework in a pragmatic rather than radical way.
Topic:
Reform, Budget, Economic Policy, and Trade Policy
Political Geography:
Europe

22. Freeports

Author:
Catherine Barnard
Publication Date:
03-2021
Content Type:
Special Report
Institution:
UK in a Changing Europe, King's College London
Abstract:
Freeports will be the centrepiece of the Budget, presented as a concrete sign, especially to ‘left behind’ communities, both of the benefits of Brexit and the Government’s commitment to the ‘levelling up’ agenda. For those looking to create ‘Global Britain’, freeports send out a message: we’re open for business. In this report, Deputy Director Professor Catherine Barnard, Cambridge University examines both the rationale for them and the existing evidence on them. The report concludes that freeports are unlikely to be a magic bullet.
Topic:
Budget, European Union, Business, Brexit, and Freeports
Political Geography:
United Kingdom and Europe

23. A green fiscal pact: climate investment in times of budget consolidation

Author:
Zsolt Darvas and Guntram Wolff
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The additional public investment need required to meet the European Union’s climate goals is between 0.5 percent and 1 percent of GDP annually during this decade. Increasing green public investment while consolidating deficits will be a major challenge. While our simulations show that budget consolidation can be done at a moderate pace in line with EU rules if those rules are interpreted flexibly, past consolidation episodes resulted in major public investment cuts. This time, there is a need for a major increase in investment. A ‘green golden rule’ (excluding net green investment from the fiscal indicators used to measure fiscal rule compliance) is the most promising option to address this tension. Relaxing the strictness of the EU fiscal framework beyond its existing flexibility and the proposed green golden rule does not appear necessary in the next few years. The uncertain growth impact of green public spending and the risks to growth from climate change create difficult trade offs in fiscally weaker countries. In any case, better regulatory policy and a higher price on emissions should incentivise private green investment and reduce public costs. These ingredients should be combined to form a ‘green fiscal pact’.
Topic:
Climate Change, Budget, European Union, and Public Investment
Political Geography:
Europe

24. Forty Years On New Perspectives on the 1981 Budget

Publication Date:
12-2021
Content Type:
Video
Institution:
Mile End Institute, Queen Mary University of London
Abstract:
This year is the fortieth anniversary of the 1981 UK Budget Statement, one of the most controversial in British history. Geoffrey Howe, the Conservative Chancellor in Margaret Thatcher's first government, deliberately increased taxes during a vicious world recession after two years of tight monetary policy and punishingly high-interest rates, to tame high inflation. Inflation dropped, but the Budget also accelerated deindustrialization and spiralling unemployment, and turbocharged inequality. It has since indelibly shaped memories of ‘Thatcherism’. Forty years on, the current Conservative government is at a new fork in the road in its economic policy, grappling with pandemic spending legacies, the fallout from Brexit, and post-2008 economics, and with electoral pledges both to fiscal probity and to 'level up' the UK.
Topic:
Economics, Labor Issues, Governance, Budget, Unemployment, and Deindustrialization
Political Geography:
United Kingdom and Europe

25. Financing the European Union: New Context, New Responses

Author:
Clemens Fuest and Jean Pisani-Ferry
Publication Date:
09-2020
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Roughly two thirds of the European Union’s budget is financed out of member states’ national tax revenues. These resources, based on gross national incomes, are transparent, fair and in line with the principle of subsidiarity but they lead to political debates that emphasise the cost of EU spending rather than the benefits, and add to the perception of the EU budget in terms of net balances, rather than value added. The financing of the EU budget must be reassessed in the light of the July 2020 decision to launch the Next Generation EU programme. Budget resources could include a plastics charge, a carbon border adjustment mechanism, a digital tax, revenues from emissions trading and a financial transactions tax. We evaluate these options against four criteria: whether the origin of the revenue can be assigned to a particular member state; whether the revenue can be raised in isolation or requires pan-European tax coordination; whether the new resource can help reduce tax distortions in the EU; and whether the resource is related to EU policies. Revenues from emissions allowances fit these criteria best. Carbon emissions do not primarily cause damage only where they occur. Taking the EU cap on emissions as a given, additional emissions in a particular member state should be regarded as a negative externality on other member states. Emission reduction objectives are set at EU level. Whoever auctions off an allowance, wherever the corresponding emission occurs in the EU, and wherever the resulting good or service is consumed, the impact on common policy outcomes is the same. In this regard, proceeds from the sale of emissions trading system allowances are not that different from customs duties. Compared to the ETS, the other candidates for EU own resources are less convincing. Carbon border adjustments are intended to limit international competitive distortions rather than to generate revenue. Digital taxes and minimum corporate taxes are best left to the process underway in the Organisation for Economic Co-operation and Development. On a financial transactions tax there is no agreement within the EU. Total ETS revenues up to 2050 would approach €800 billion in a realistic scenario and possibly even €1.5 trillion assuming the scope of the ETS and the share of auctioned permits are increased. ETS revenues therefore would be largely sufficient to repay the Next Generation EU debt. However they would generate distributional effects, and so part of the revenues should finance grandfathered rights that would accrue to the member states. The EU can tackle the distributional issues involved in the reform of own resources.
Topic:
Budget, European Union, Finance, Tax Systems, COVID-19, Decarbonization, and Digitalization
Political Geography:
Europe

26. European Union recovery funds: strings attached, but not tied up in knots

Author:
Jean Pisani-Ferry
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The European Union’s plan for aiding recovery in member states hit by the coronavirus crisis has been rightly hailed as a major breakthrough for the bloc. But there is much less clarity on the plan’s economic aims, its priorities and the content of the contractual arrangements it should entail between the EU and member countries. The plan’s main plank, the Recovery and Resilience Facility (RRF) is widely seen as a short-term Keynesian stimulus. The EU debt is expected to be repaid through contributions from member states, but this has not stopped the resulting transfers as being seen, including by national governments, as money from heaven. There has also been controversy over the conditions attached to grants and loans. Such fuzziness over objectives and overloaded procedures can derail the RRF. The EU needs to make an effort to provide clarity from the outset and put the plan on the right track. It should acknowledge and emphasise that the main goal of the RRF is not to contribute to immediate relief or a Keynesian stimulus, but to foster structural transformation, especially in less-advanced and harder-hit member states. The EU should hold back from trying to impose through overall policy conditionality its reform agenda on the member states. Instead, there should be a narrow-conditionality approach in which reforms that strongly complement intended investments should be identified and bundled with that investment. A grant aimed at encouraging decarbonisation in the transport sector, for example, would, be made conditional on the elimination of transport fuel subsidies. Therefore, in national recovery and resilience plans, each bundle of investments and reforms should be focused on the limited set of policy measures that need to be implemented to maximise the impact of EU-financed investment. Meanwhile, complementarity across objectives should be addressed through a dialogue with each member state on the sectoral allocation of EU funding and the overall architecture of their recovery and resilience plans. And the EU should emphasise when relevant the cross-border dimension of investment plans and find ways to encourage member states to cooperate on the design and the implementation of their plans.
Topic:
Governance, Budget, European Union, Macroeconomics, and COVID-19
Political Geography:
Europe

27. EU MONITOR: The EU invests very little in culture but the results are visible

Author:
Karel Barták
Publication Date:
01-2020
Content Type:
Special Report
Institution:
Europeum Institute for European Policy
Abstract:
The European Commission proposed in May 2018 to continue implementing the Creative Europe programme even more in the next budgetary period 2021-2027. This problematics is the main topic of Karel Barták's latest EU Monitor. The European Commission proposed in May 2018 to continue implementing the Creative Europe programme in the next budgetary period 2021-2027 with an envelope of 1,85 billion euros. Should the Member States agree, it would mean an increase of 26,5 percent compared to the current budget (2014-2020). Most of the money should go as usual to the audiovisual part of the programme (MEDIA), with emphasis on distribution of European films outside their country of origin. In the „culture“ part of the programme the draft mentions as priorities music, publishing, cultural heritage and architecture.
Topic:
Culture, Budget, European Union, and Investment
Political Geography:
Europe

28. Multi-annual financial framework and Next Generation EU, Review of an unprecedented, tumultuous European budgetary chapter

Author:
Anne Vitrey and Sébastien Lumet
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
Robert Schuman Foundation (RSF)
Abstract:
Negotiations on the adoption of the multi-annual financial framework 2021-2027 and the "Next Generation EU" recovery fund continue. Although hope of an agreement allowing deployment from 1 January 2021 has not yet been lost, there are still many sticking points. This is illustrated by the strong tensions that have recently emerged between the European Parliament and the Council of the European Union, but also between Member States, themselves reluctant to question the precarious balance of the 21 July agreement.
Topic:
Budget, European Union, Finance, and Economic Recovery
Political Geography:
Europe

29. Challenges facing the CAP over the next decade

Author:
Bernard Bourget
Publication Date:
02-2020
Content Type:
Policy Brief
Institution:
Robert Schuman Foundation (RSF)
Abstract:
The Common Agricultural Policy (CAP) will enter the next decade relieved by Brexit of its fiercest opponent but weakened by the external pressures to which it has been subjected, and disrupted by the enlargement of the European Union. In the 2020s, it will have to take full account, in conjunction with the European Commission's Green Deal, of the environmental and climate issues that are so important for agriculture. It will also have to improve the management of climate, health and market risks, which global warming could aggravate, and strengthen the negotiating capacity of producer organisations with their powerful buyers in the food industry and supermarkets. Budgetary pressure may lead the European Union to distribute direct payments, (which account for three quarters of CAP expenditure), more fairly by placing the burden rather more on large farms, in order to spare the medium-sized family farms, which are still numerous in the western part of the continent. Finally, the CAP should be coordinated with other European policies, particularly trade policy.
Topic:
Agriculture, Climate Change, Budget, European Union, and Trade Policy
Political Geography:
Europe

30. How good is the European Commission’s Just Transition Fund proposal?

Author:
Alienor Cameron, Gregory Claeys, Catarina Midoes, and Simone Tagliapietra
Publication Date:
02-2020
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
On 14 January 2020, the European Commission published its proposal for a Just Transition Mechanism, intended to provide support to territories facing serious socioeconomic challenges related to the transition towards climate neutrality. This brief provides an overview and a critical assessment of the first pillar of this Mechanism, the Just Transition Fund (JTF).
Topic:
Climate Change, Governance, Budget, European Union, Macroeconomics, Renewable Energy, and Transition
Political Geography:
Europe