Modern trends in the EU’s integration: rebuilding and transforming member states’ economies

Contemporary global challenges together with the post-pandemic complications are radically changing the pace and content of the European integration; the latter’s process is being already modernized through new Union policies. However, the recovery and resilience requirements provide for dramatic changes in the member states political economies which require inclusion of new trends and instruments.

Already in November 2020, a political agreement was reached among the three EU’s legislative institutions (i.e. the European Parliament, the Council and the Commission) and the heads on the 27 member states/governments on the next long-term EU budget (MFF-27) and a new financial facility called NextGenerationEU program aimed at recovery and resilience in the states (the RRF).

Some of the responses to the “post-Covid” complications have been already reviewed in our Institute’s research articles. See more for example in: https://www.integrin.dk/2020/10/25/post-covid-effects-on-modern-governance-and-political-economy/ and other articles. 

 

The legal adoption of the MFF package into a Union’s regulation (follow by the ratification process in the states), is particularly vital concerning the important financial component, the so-called “own resources part” of the MFF-RRF package to the states financial obligations. Thus, the EU’s long-term budget, coupled with the NextGenerationEU instruments (the latter is, however, a temporary measure designed to drive the recovery in the states) have become the largest stimulus package ever financed through the EU financial means with a total budget of about €1.8 trillion, which is going to support the transition towards a greener, more digital and resilient Europe. No doubt, it’s the important and necessary step in the progressive moves towards new trends in European integration.   

However, the main directions in the next year’s budget do not reflect the optimal allocation of resources towards sustainability, green growth, digitalisation and other EU’s challenges. Thus, over €100 billion (out of total 166) is devoted to two main directions, i.e. a) agro-food and fisheries sectors (with some resources for and crisis management); and b) supporting investment in economic, social and territorial cohesion. 

More in: https://www.integrin.dk/2020/12/20/eus-budget-for-2021-recovery-and-resilience-in-action/

 

The regulation’s draft will have to be finalised at a technical level: i.e. the European Parliament and the Council must formally approve the text so that the regulation can enter into force. Once the regulation is fully approved, the EU states will have to submit their recovery and resilience plans and setting out a coherent package of national reforms and investment projects.

The political agreement reached between the European Parliament and the Council on the Recovery and Resilience Facility (RRF) has become a solid ground to practical implementation of the recovery measures in the member states “advised” by the Commission. Among these measures, the RRF is the key instrument in the financial instruments both in the EU’s integration plan and in the states’ recovery-resilience efforts. The RRF’s €672.5 billion in loans (360 billion) and grants (312,5 billion) will be available during next seven years to support reforms and investments undertaken by the states.

However, each national recovery-resilience plan is expected to contribute to the four dimensions in the 2021 Annual Sustainable Growth Strategy, which launched the new year’s European Semester cycle, including: a) environmental sustainability, b) productivity, c) fairness, and d) macroeconomic stability.

More in the Commission press release: https://ec.europa.eu/info/business-economy-euro/recovery-coronavirus/recovery-and-resilience-facility_en

 

Thus, the RRF will play a crucial role in mitigating the economic and social impact of the coronavirus pandemic by making European/member states’ socio-economic development more sustainable, resilient and better prepared for the green and digital transitions. 

 

Main elements of the RRF’s agreement

The European RRF is a complex endeavor and is structured around six pillars: – green transition; – digital transformation; – smart, sustainable and inclusive growth and jobs; – social and territorial cohesion; – health and resilience measures; and – national policies for the next generation, children and youth, including education and skills.

 

The EU-wide approach is providing the member states’ governance with the necessary theoretical and practical impulses to modernise their national political economy’s structures.

The EU-27 member states have committed to achieve climate neutrality by 2050; the European Council in early December backed the Commission’s proposal to reduce greenhouse gas emissions by 55 percent by 2030 compared to 1990 levels.

Thus the EU member states should therefore prioritise reforms and investments that support the climate transition. The RRF’s agreement provides that a minimum of 37% of expenditure on investments and reforms contained in each national recovery and resilience plan should support climate objectives.

In addition, all investments and reforms in the states must respect the “no-harm” principle, ensuring that the national policies do not significantly harm the environment.

Member states should also ensure a high level of ambition when defining reforms and investments enabling the digital transition as part of their recovery and resilience plans. A minimum of 20 percent of expenditure on investments and reforms contained in each national plan should support the digital transition.

National recovery and resilience plans are also expected to contribute to effectively addressing the challenges identified in relevant country-specific recommendations under the European Semester, which is a vital framework for coordinating economic and social policies in the states.

A scoreboard will be established to make publicly available all the information on progress in the implementation of the European RRF and the national contingency’s plans.

 

Therefore, the member states will need to put in place strong measures to protect the “common financial interests of the Union”, especially to prevent fraud, corruption and conflicts of interest.

It was also agreed that 13 percent of the total amount allocated to the states will be made available in pre-financing upon the approval of recovery and resilience plans, to ensure that the money starts flowing as soon as possible to support the nascent economic recovery.

 

Official opinion

European Commission President Ursula von der Leyen: “We have an unprecedented financial package – the EU Budget and our recovery plan NextGenerationEU – to power our economies. The Recovery and Resilience Facility will be right at the heart of NextGenerationEU… as an important step towards financing the investments and reforms to support the economic recovery and laying the foundations for a stronger, more resilient Europe.”

 

Executive Vice-President for economic development, V. Dombrovskis: “The EU’s three main institutions have now reached political agreement on the Recovery and Resilience Facility, which paves the way for €672.5 billion in loans and grants. This Facility will support national reforms and investments… and help overhaul of EU economies, making them greener and more digital in an inclusive and socially-fair way. Member states now have the certainty they need to finalise their national plans, so they can access this unprecedented funding. We will support them along the way to make the most of this opportunity. Our focus now is to get funds flowing to those who need them most and get the EU’s collective recovery fully underway.”

 

Commissioner P. Gentiloni: The Recovery and Resilience Facility opens the way for Europe not only to rebuild its economy after the pandemic but to transform it. We now have a unique chance to deliver on our environmental commitments, to accelerate the digital transition, to boost skills and address inequality. To make a success of this opportunity, the Commission and national authorities must work hand in hand to approve swiftly and then implement effectively a set of ambitious, credible national plans. As this grim year draws to a close, let’s look ahead to 2021 with both optimism and determination.”

References to press release: https://ec.europa.eu/commission/presscorner/detail/en/IP_20_2397

 

More information in: = Commission webpage on the Recovery and Resilience Facility and = Commission proposal for establishing a Recovery and Resilience Facility

Leave a Reply

Your email address will not be published. Required fields are marked *