A new generation pact for a sustainable and resilient European economy

The corona pandemic had demonstrated some of the fragilities of our current economic system. Like CO2-emissions, the virus does not care about borders. It affects a country independently of its economic situation and it puts at risk the health of all citizens. However, the poorest and the most vulnerable are the ones at higher risk. The pandemic shows how vulnerable the European Union and the Member States are, and how interdependent they are of each other and of the rest of the World. Our economies and our European way of living are severely affected. But today there is a unique chance to rethink our ambitious objectives and to rebuild together a better economy based on renewed principles.

People have been asking for change for the last couple of years. The increased participation in the 2019 European elections was a clear sign that citizens want to be part of the European Union. But they ask for a different governance. Europe should lead in the green and digital transitions. The European Green Deal should be the motto for the European recovery and one of the cornerstones of Europe’s recovery from the pandemic. Green recovery is broader than the ecological and environmental dimensions: it is about the wellbeing of citizens, about transforming the way we live and about building an inclusive and resilient economic growth model.It is more than making changes in technologies and production processes, it is also about speeding up and scaling up our actions on all fronts.

“The recovery is an opportunity to renew our economic growth model.”

Europe can emerge stronger from the crisis, but it has to do it right. The next Multiannual Financial Framework and the EU Recovery Plan, with a new recovery instrument – Next Generation EU– is included, is an opportunity to get the economies back on their feet by investing in a fossil-free economy and climate-friendly infrastructure that boosts growth, promotes real structural changes in their economies and creates new jobs. The recovery should be forward-looking and not aimed at restoring the pre-crisis status quo. It is an opportunity to renew our economic growth model, to invest in people and our future and to put all efforts on the long-term EU objectives of cohesion, convergence, and competitiveness.

It is clear that public money will not be enough to cover the spectrum of economic activities and Europe shouldn’t advocate for financing support schemes for all sectors of the economy in all Member States. The Union should focus on what will really transform the European economy. We need to identify the core competences and build sustainable, innovative and competitive value chains in strategic sectors for a decarbonised and circular economy transition such as clean batteries. That will demand a reallocation of resources, and for that, we need a socially fair and just transition. The transition can only be successful if the green economy is not seen as something in parallel and if we have all on board.

“we cannot succumb to the temptation to support declining industries”

As the main investment tool to promote change, the EU budget must ensure that all the policies respect the “do not harm” the environment principle and that at least 25% of the budget is dedicated to green policies. The budget must be used to completely transform our energy systems by accelerating the roll-out of renewable energies (and other decarbonised fuels such as clean hydrogen) and charging systems. There are still a high number of buildings in Europe that are energy inefficient, investment improving the quality of buildings will trigger employment and industrial production, and improve the living conditions of Europeans, especially of the most vulnerable.

The current crisis is affecting the way we commute and travel and therefore some sectors, such as the car and aviation industry, are being severely hit. The industry outlook will be different after the crisis, but we cannot succumb to the temptation to support declining industries. The EU support should target solutions that reduce our dependence on the most polluting modes of transport enabling a transition to clean vehicles and ensuring that mobility policies also stimulate new business models. We need to invest massively in sustainable transport infrastructures, improve urban mobility, and complete key European transport network infrastructure.

For a healthier future, we need to accelerate the transition towards circularity to turn Europe more resilient to prevent and protect future shocks and strengthen Europe´s strategic autonomy. A forward-looking economy ensuring Europe´s industrial leadership position demands huge investments on research and innovation namely to support the development and deployment of clean energy technologies. The European Agriculture Policy needs to be modernised towards more sustainable food production methods and small-scale producers, support innovative farming techniques, fight food waste and focus on more organic production, preservation of biodiversity, natural ecosystems and sustainable forest management.

“The European Green Deal and the EU budget are instruments of European solidarity.”

A successful transformation will not only imply the change of policies but also review a great part of the EU governance. The EU budget has been, in the last years, mainly financed by national contributions. The recovery plan will be financed by 750 billion Euro in common debt that the Commission will borrow on the capital markets. Green taxation is a way to pay it back and it is a great opportunity to have fresh money for our future and decrease the burden from Member States. A new EU-wide tax on plastic waste could raise almost 7 billion Euro per year and a revision of the EU Emission Trading Scheme – the EU’s carbon market system that allows companies to trade CO2 emissions permits – could generate an average of 10 billion Euro per year. 

Next year, the Commission will move forward on its proposal on carbon pricing to prevent excessive carbon leakage. A levy on carbon-intensiveindustrial products or sectors ensuring that all products, whether imported or produced domestically, are treated the same way would encourage consumers and firms to cut their emissions ensuring the decarbonisation of the economy. 

The European Green Deal and the EU budget are instruments of European solidarity. The future negotiations on financing the Union could become the most difficult discussions ever. The European Commission presented an ambitious recovery package with true instruments of solidarity (such as common borrowing), but to have a budget approved we need unanimity.

The pandemic can be a catalyst for a leap forward in the future of the EU integration and this is a moment for its leaders to show their bravery in the negotiations to build a more sustainable and resilient EU Economy. That would not only be a breakthrough in the bloc’s integration, but for the entire planet.

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