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Begin New Search Topic European Commission Author Jeromin Zettelmeyer

1. Not yet Trump-proof: an evaluation of the European Commission’s emerging policy platform

Author:
Heather Grabbe and Jeromin Zettelmeyer
Publication Date:
01-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The economic strategy being defined by the 2024-2029 European Commission seems to follow the prescriptions on innovation and single market reform, and the expansive approach to industrial policy, set out by Mario Draghi in his September 2024 report on European Union competitiveness, with two important differences. First, the Commission stops short of calling for World Trade Organisation-prohibited subsidies – this is welcome. Second, the Commission proposes a new state aid framework for national industrial policy rather than expansion of EU-level public investment funding. This runs the risk of weakening the single market and harming competition, with the unintended consequence of protecting incumbents and inhibiting structural change. In terms of specific policies, on defence, the Commission is right to face up to the challenge of defining an EU procurement mechanism that offers sufficient speed and cost advantages to justify large-scale funding. On economic security and international partnerships, the Commission is right to take a broader approach than a foreign economic policy focused only on supply chains. What is lacking is a much greater commitment to providing support for climate mitigation in developing countries. The second Trump presidency creates risks for the Commission strategy. President Trump has gone further than expected in threatening territorial expansion and with the speed, aggression and disregard for the rule of law with which he has started to implement his policies. These factors will complicate the EU-United States relationship. The best defence against both Trump and the competitive and security threats posed by China is to accelerate policies that address the EU’s structural weaknesses: raising productivity growth, defence capacity and economic security. Economic security, in turn, requires more resilient trade relationships, less financial dependence on the US and an improved standing with emerging market and developing economies. The EU should also seize the opportunity offered by the shift in US policy from subsidies to deregulation. While the EU should not race Trump to the bottom on environmental or financial deregulation, it should rapidly improve its own regulatory framework while building on its core strengths: human capital and the rule of law. Unlike tariff wars or discriminatory subsidies, a competition to provide a good business environment is not a zero-sum game.
Topic:
Security, Economics, Industrial Policy, Budget, European Union, Digital Economy, Trade Policy, Donald Trump, Sustainability, European Commission, and Energy
Political Geography:
Europe and United States of America

2. Overcome divisions and confront threats: Memo to the Presidents of the European Commission, Council and Parliament

Author:
Maria Demertzis, André Sapir, and Jeromin Zettelmeyer
Publication Date:
07-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
In the last five years, the European Union managed to find its way through a series of major shocks, including the pandemic and the 2022 surge in energy prices. The response was in many ways remarkable, including unprecedented EU borrowing to fund the NextGenerationEU economic recovery programme and a coordinated reduction in energy demand. However, these crises have left the EU in a bruised state. The pandemic recession and energy-support measures have squeezed fiscal space. Higher energy prices have persisted and EU industrial competitiveness has been eroded. The productivity and per-capita income gap with the United States has widened. Meanwhile, the world around the EU has become more threatening and fragmented. The military situation in Ukraine remains precarious. China has become both more authoritarian and more assertive. The US shift toward protectionism has become entrenched. There is less consensus for measures to combat climate change. In the face of all this, the challenges confronting you are substantial. In the next five years, you must continue to support Ukraine while implementing measures to reinvigorate EU growth, meet the 2030 climate targets and lay the ground for meeting the 2040 goals, and secure faster emissions reductions beyond the EU’s borders. Social cohesion needs to be restored to head off threats to the EU model. More needs to be done to improve EU external security. Promoting growth and enhancing cohesion will entail further deepening of the single market in areas with the highest growth impact, doing more to support innovation and defending competition, openness and multilateralism. Safeguarding the European Green Deal means boosting green industrialisation and fair burden-sharing, while scaling up international climate finance. Strengthening security requires continued support for Ukraine and the addressing of economic security risks. Underpinning all of this, a serious effort must be made to improve EU governance – and it must be done without creating further division.
Topic:
Security, European Union, European Parliament, European Commission, Energy, Regional Politics, Competition, European Council, and Threat Assessment
Political Geography:
Europe

3. A quantitative evaluation of the European Commission’s fiscal governance proposal

Author:
Zsolt Darvas, Lennard Welslau, and Jeromin Zettelmeyer
Publication Date:
09-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
In the new European Union fiscal framework proposed by the European Commission in April 2023, medium-term fiscal adjustment requirements would be determined by country-by-country debt sustainability analysis (DSA), the 3 percent deficit ceiling and simple rules requiring minimum deficit and debt adjustments (‘safeguards’). These elements are controversial, with some EU countries (and ourselves) preferring a DSA-based approach, while others prefer to stick to simple rules. This paper evaluates the proposal by replicating the DSA methodology and computing fiscal adjustment implications for all EU countries with debt above 60 percent or deficits above 3 percent of GDP. We find that the proposed framework would require ambitious fiscal adjustment: on average, more than 2 percent of GDP over the medium term, in addition to the adjustment that is already planned for 2023-24. However, for most high-debt countries, these requirements are below those implied by the current framework. We also find that for most countries with debt above 60 percent of GDP, these adjustment requirements are driven by the DSA rather than the safeguards, but with significant exceptions. The main exception is France, for which the ‘debt safeguard’ – which requires debt to fall within four years – imposes much higher fiscal adjustment than the DSA. If the adjustment period were to be extended from four to seven years (as is possible under the framework for countries that submit growth-enhancing reform and investment plans), the safeguards would also be binding for several other countries. In addition, a requirement to reduce the deficit by at least half a percent per year if it exceeds 3 percent of GDP could become binding ex post, in response to output shocks, even if countries implement the fiscal adjustment required ex ante. Finally, we find that while the Commission’s DSA methodology is reasonable, it would benefit from review. This should be done by an independent expert group in consultation with the Commission, member states and other stakeholders, and endorsed by the Council. We recommend the endorsement of the Commission’s proposal after ambiguous aspects are clarified, the debt safeguard and other safeguards are removed or modified, the excessive deficit procedure is reformed to avoid procyclical adjustment, and a process for reviewing the DSA methodology is put in place.
Topic:
Governance, Regulation, Fiscal Policy, and European Commission
Political Geography:
Europe