“Next Generation EU” (NGEU) has been introduced by the Commission and the Council to counter the negative impacts of the COVID-19 crisis. As it is still up to the Parliament to implement it into legal basis, there are uncertainties about how NGEU is concretely going to work. In a virtual event organized by the Espacio Bertelsmann in cooperation with the Europe’s Future programme, the German embassy in Madrid and the European Commission, European experts came together to discuss the design of NGEU in order to achieve a new strong European economy.
Katharina Gnath from the Europe’s Future programme opened the event with some introductory words. She stressed that the coronavirus crisis has hit all European economies and that it is therefore of high importance to have NGEU as a European-wide solution. The crisis has shown increased need for European cooperation. As the Council approved the Commission’s proposal for this 750bn euro package, it is now up to the Parliament to implement the new instrument into legal basis.
After the short introduction into the current situation around NGEU, moderator Federico Steinberg introduced all panellists, namely Céline Gauer, (Acting) Head of the Recovery and Resilience Task Force (RECOVER) and deputy Secretary-General, Claudia Dörr-Voss, State Secretary at the Federal Ministry for Economic Affairs and Energy of the Federal Republic of Germany, Carlos San Basilio, Secretary General of the Treasury and International Financing at the Ministry of Economic Affairs and Digital Transformation of the Kingdom of Spain and Marcel Fratzscher, President of the German Institute for Economic Research (DIW Berlin). He emphasized that there is currently lots of confusion about how NGEU is going to work. To get a better understanding of NGEU and its conflicts he asked the panel questions about the implementation, concrete goals like climate-related spending, debt-to-GDP ratios, growth prospects and the role of monetary and fiscal policy.
The Commission has to ensure that the funding of NGEU is used in the most effective way.
Céline Gauer as expert on the Recovery and Resilience Facility (RRF) which is the main element of NGEU, explained in short the current ideas on NGEU and the RRF. With respect to the proposed climate-related spending of 37%, she stressed that the RRF should fill the gaps to meet the European 2050 targets. Europe has to use the crisis as an opportunity to accelerate the green and digital transition. She pointed out three flagship areas identified by the Commission: Building renovations, sustainable mobility and renewable energies. But as the challenges of the member states are different, also the concrete recovery plans are allowed to differ. The Commission only has to ensure that the funding is used in the most effective and complementary way as possible.
European solidarity and cooperation are important for Germany.
Claudia Dörr-Voss provided insights into the German thinking about NGEU. She declared that European solidarity was always important for Germany. Nevertheless, the RRF is no unconditional country support but rather an instrument to improve resilience, competitiveness and growth in Europe. She highlighted that Germany has proposed even before the Presidency and the COVID-19 crisis some initiatives for deeper a European collaboration, like the “Important Project of Common European Interest” (IPCEI) for hydrogen issues and European data management. Germanies current goals for the national recovery plan are eco-conversion of the fiscal stimulus package and the support of projects concerning climate neutrality, sustainable mobility and digitalization.
Funding from NGEU is crucial for Spain to follow a long-term growth path.
Carlos San Basilio confirmed that NGEU is a major breakthrough for the EU from Spain’s perspective. For Spain it is now most important in the next years to cope with the impacts of the pandemic and to improve the resilience simultaneously. He wants to put Spain on a long-term growth path with the help of the resources from the RRF. But to be able to meet the challenges caused by the coronavirus crisis, it is highly important for Spain to get a significant part of the RRF resources next year. Moreover, he called up to not only look at what countries can do for their own, but also consider pan-European and subnational synergies and multiplier effects. Regarding possible risks for the next years, he particularly named the situation in the corporate sector.
We are far from through the crisis.
Marcel Fratzscher assessed the situation from a macroeconomic point of view. In line with the other speakers he stated the importance of NGEU for the long-term European economy. Although projections for the next years show a gradual recovery, existing risks are still enormous. He sees several problems: The same countries that were hit hard by the first wave of the pandemic are now again severely affected. Regarding monetary policy deflation will serve as a problem as the crisis is a supply-driven crisis. Corporate investment and consumption are very low but the ECB cannot tackle these challenges alone. Fiscal policy at the national level has to support European monetary policy. Additionally, there is the issue of debt, which is sharply increasing, both in the private and public sector. As cutting public investments is no possible solution, Europe has to increase productivity instead. Therefore, it is important that the RRF serves as an additional funding and that it does not replace existing funds. Aside of these problems caused by the crisis, Europe has to tackle difficulties existing prior to the crisis like the lacking technologies compared to the US or China. To manage this, NGEU needs to be followed by further measures at the European level.
In conclusion, the moderator named four main takeaways:
- Europe is clearly part of the solution to the crisis. Monetary policy and institutional improvements are crucial.
- There are huge tasks ahead of Europe. The Commission is well prepared, but there is a lot of confusion at level of the member states about NGEU. The EU should prepare its members for the challenges of the 21st century.
- Most important risk is corporate debt. Therefore, the financial & banking sector keep being part of the solution.
- Debt-to-GDP ratios are going up. But at this point of time it is acceptable as we need European investments to recover from the crisis.
Watch the discussion here: #NextGenerationEU: CREATING A NEW STRONG EUROPEAN ECONOMY
The debate is part of the event-series "Juntos Relanzando Europa" ("Together. Making Europe Strong Again."), which takes place at the Espacio Bertelsmann in Madrid during Germany's EU Council Presidency (due to corona only virtual). The series is organized by the Bertelsmann Stiftung, the German embassy in Madrid and the EU Commission delegation.