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Begin New Search Topic European Union Author Frederico Mollet

1. Rethinking EU economic governance: The foundation for an inclusive, green and digital transition

Author:
Francesco De Angelis, Laura Rayner, and Frederico Mollet
Publication Date:
02-2022
Content Type:
Working Paper
Institution:
European Policy Centre (EPC)
Abstract:
The European Union is undertaking a comprehensive review of its economic governance framework, to address longstanding criticisms, respond to the impact of COVID-19, and prepare for the challenges posed by the twin green and digital transitions. This Discussion Paper represents the final instalment of an EPC Task Force series that examined the current approach and proposes 10 concrete policy recommendations to make EU economic governance stronger, greener and fairer: Establish a central investment capacity for green and digital investments (including associated social investments) or, alternatively, a golden rule modelled on the governance of the Recovery and Resilience Facility. Introduce a single net expenditure rule with a country-specific debt target based on nationally designed expenditure and debt plans to enhance political ownership. Shift to a multiannual supervision and assessment framework and introduce fixed medium-term budgetary plans, with a control account tracking deviations. Reform the sanctions regime to increase proportionality, perceived fairness and political enforceability. Differentiate country-specific supervision based on a clear risk threshold. Introduce ‘National Reform and Investment Plans’ modelled on the National Recovery and Resilience Plans, using a commitments-based approach to operationalise social, fiscal, macroeconomic and structural country-specific recommendations. The plans’ components with strong links to fiscal sustainability should govern the use of Stability and Growth Pact (SGP) flexibilities. Reform the Stability and Convergence Programmes (SCPs) to focus more on the investment composition of national fiscal plans and their link to broader policy objectives. Introduce an opinion on the individual and joint impact of the SCPs on imbalances into the Macroeconomic Imbalances Procedure to strengthen its link with the SGP. Introduce new processes into the European Semester to assess non-macroeconomic structural risks, such as climate and environmental risks. Build on the success of the temporary Support to mitigate Unemployment Risks in an Emergency (SURE) programme to create insurance-based mechanisms to support national fiscal policy during downturns.
Topic:
Economics, Governance, European Union, and Digital Transition
Political Geography:
Europe

2. Updating the European industrial strategy for the post-pandemic world

Author:
Marta Pilati and Frederico Mollet
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
On 27 April, the European Commission is expected to publish an update to their 2020 Industrial Strategy, a blueprint for an assertive European industrial policy that drives the digital and green transitions. While the current strategy’s broad principles continue to hold, it must now adapt to the post-pandemic world’s challenges. Furthermore, the original strategy only provided a high-level roadmap, with many areas requiring further development. Frederico Mollet and Marta Pilati break down European industry’s weaknesses and potential areas of success, the effects of COVID-19 this past year, key points of the 2020 Industrial Strategy and its relevance for Europe and beyond. They outline 16 recommendations which would strengthen the design and implementation of the programmes outlined in the current strategy, across four themes: finance, industrial ecosystems and alliances, technology transfer, and strategic autonomy.
Topic:
Development, Political Economy, European Union, Digital Economy, Green Technology, Industry, COVID-19, Strategic Autonomy, and European Commission
Political Geography:
Europe

3. China’s grand industrial strategy and what it means for Europe

Author:
Frederico Mollet
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
In its 14th Five-Year Plan, China has mapped out a grand economic and industrial strategy that upends many of the assumptions that underpin the EU's approach - how can the Union respond? With this new plan, the EU can expect tougher competition and greater protectionism in its economic relations with China. A further blurring of the public-private sector distinction in the country's economic model will make it harder to combat unfair Chinese competition. And while China is actively courting foreign investment, it is also signalling greater protectionism to products not made in China, which will lead to European investors' and exporters' interests diverging. To balance the scales, the EU should adapt its own strategy by: continuing to develop trade instruments to combat unfair competition at home and abroad; ensuring that these instruments and institutions can respond to unfair competition from private companies benefiting from state capital investment; ensuring that the extensive and often opaque government holdings in private firms are reflected in foreign direct investment and export controls; incorporating China's attempts to reconfigure supply chains into its own assessment of strategic dependencies, identifying areas that could become vulnerable; prioritising the improvement of access to the Chinese market for goods and services produced in Europe; developing alternative sources of growth, and boost demand and reduce barriers within the Single Market to offset greater Chinese protectionism; and ensuring that its industrial policy efforts will enable European industry to match China's developments. The present moment may mark a turning point in EU–China relations: in a little over three months, an agreement on an investment treaty was followed by sanctions and countersanctions. Geopolitical conflict ratchets up between China and the US. Beijing's new economic course will reshape its global relationships. China's protectionist turn and growing one-sided dependencies will threaten Europe's long-term strategic autonomy and undercut any attempts to construct a balanced approach to EU–China relations. If the EU's multi-track strategy is to work, a concerted effort is required to preserve economic parity and balance between the two powers.
Topic:
International Relations, Political Economy, European Union, Grand Strategy, Industry, and Supply Chains
Political Geography:
China, Europe, and Asia

4. How to get European businesses to digitalise

Author:
Frederico Mollet
Publication Date:
07-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
Europe’s underperforming tech sector and reliance on foreign technologies has long alarmed its policymakers. But a significant – and often overlooked – factor in the EU’s economic underperformance over the last two decades is its slow business digitalisation. EU industry, especially SMEs, struggles with the prosaic challenge of integrating digital technologies into its business models and operations. The preoccupation tends to be on how to foster new digital start-ups. But what about the digitalisation of existing firms? The EU budget and recovery fund are armed with a range of new EU funding streams and programmes to tackle this challenge. With its 2030 targets and new policy framework, the EU aims to catch up with the previous generation of digital technologies and ensure that it does not miss out on the next wave of transformational change. Otherwise, Europe will fall behind its economic competitors even further. But there are still some gaps in the EU’s game plan for business digitalisation. Frederico Mollet outlines several areas where the new policy framework can be optimised, and new initiatives would be worthwhile: Additional funding should be mobilised from Cohesion Policy funds. Business digitalisation is a critical factor in regional convergence, and so an increased funding share would be in line with the policy’s main objectives. The Commission should use its coordinating and convening powers to get banks to commit to a best practice code, to assess digitalisation loans and improve their staff’s digital knowledge. Public authorities should leverage private partners. Many firms lack the awareness and information necessary to digitalise, but a number of ‘access points’ and private sector networks (e.g. finance providers, B2B businesses, supply chain networks) can reach them. The EU should consider complementing the design and implementation of European Digital Innovation Hubs and transition pathways – its main programmes for supporting business digitalisation directly – with 5 additional components. Taken together, these recommendations will bolster the funding available for business digitalisation, tackle some of the critical barriers to finance, and optimise the delivery of the Commission’s programmes.
Topic:
Political Economy, Science and Technology, European Union, Business, and Digitalization
Political Geography:
Europe

5. Rethinking EU economic governance: The Stability and Growth Pact

Author:
Francesco De Angelis and Frederico Mollet
Publication Date:
11-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
It is time to reimagine the EU’s economic governance. In early 2021, the EPC set out to do just that in its Rethinking EU Economic Governance Task Force. Drawing on insights from participating experts, academics and policymakers, this first Policy Brief in a series of EPC publications outlines how the debate on the Stability and Growth Pact (SGP), the EU’s framework for fiscal and macroeconomic surveillance, has evolved and the reform options that have surfaced. There is broad dissatisfaction with the SGP and how it has fared in an environment of prolonged low-interest rates, missed inflation targets and low growth. In February 2020, the European Commission launched a review of the SGP in an attempt to address its shortcomings, but it was quickly put on hold by COVID-19, when the fiscal rules were suspended. Half a year later, the Commission is finishing what it started. We are in a drastically different world since the European Commission launched the review. Not only has government debt increased significantly, but regional, economic and social divides have worsened, policymakers face inflationary pressures for the first time in decades, and the Recovery and Resilience Facility and accompanying EU-level bond issuance fundamentally changed the EU’s economic architecture. In parallel, there is a widespread acknowledgement that averting, as well as adapting to, the climate crisis requires a steep increase in public investment. Thanks to the EPC Task Force’s ongoing work, Francesco De Angelis and Frederico Mollet can pinpoint the SGP’s major flaws, post-COVID-19 challenges, and five broad categories of reform options: Interpretative flexibility to smooth fiscal adjustment paths and potentially place less emphasis on problematic indicators. Moderate non-treaty reforms to reduce complexity and procyclicality and increase enforceability. The ‘golden rule’ to exempt some public investments from the fiscal rules. Central fiscal capacity for macroeconomic stabilisation. Off-balance-sheet investments to increase public investment.
Topic:
Political Economy, Governance, European Union, Economic Growth, COVID-19, Economic Stability, and European Commission
Political Geography:
Europe

6. Rethinking EU economic governance: The European Semester

Author:
Frederico Mollet
Publication Date:
12-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
In the debates over the future of the EU’s economic governance, the reform of the Stability and Growth Pact (SGP) usually takes centre stage. But the European Semester – the framework governing economic policy coordination and country surveillance – is also critical. Reforming and strengthening it is vital given the multiple challenges the EU faces, from the twin green and digital transitions to implementing the Recovery and Resilience Facility (RRF) and tackling the macroeconomic and structural scars left by COVID-19. This Policy Brief, the second in a series of EPC papers that reassess the EU's economic governance policies, sets out proposals for reforming the European Semester across three strands: (i) integrating the RRF into the Semester; (ii) drawing on the positive lessons of the RRF process; and (iii) improving the effectiveness of cross-cutting policy coordination and the Macroeconomic Imbalances Procedure (MIP).
Topic:
Governance, European Union, Economy, COVID-19, and Economic Recovery
Political Geography:
Europe