Europe should become stronger and more sovereign through the provision of more and better European Public Goods (EPGs). The European Union (EU) should take on more of the tasks to which it can lay claim by virtue of its size and function. Europe should become more European. In order to make good this claim, the Union more than likely will have to assume more of the features of a cooperative federal state.
Putting the concept of European common goods into practice requires one to spell out more clearly the way forward and to know how these EPGs can then be set to work. The present paper addresses the following issues: first, the appropriate institutional framework for the introduction and provision of European public goods; second, how best to phase in that provision within the European multi-level system of governance. For this purpose, it uses two analogies.
With the first analogy, we ask whether the EU as a sui generis political entity would not be better understood by being explicitly viewed as a co-existence of federal state and confederation. The federal-state-like supra-national model provides a democratically and fiscally appropriate governance framework for the provision of new European public goods but places significant obstacles in the way of their introduction. The opposite is true for the confederation-like intergovernmental model: this is poorly suited for the provision of new European public goods but offers greater prospects for their successful introduction. Such considerations might suggest that additional EPGs are faced with their own "federal paradox". This paradox is not insurmountable but must always be kept in mind.
The second analogy compares the EU – especially its federal component – with the German model of coop-erative federalism or “administrative federalism”. This comparison brings to the fore the issues and tasks that providing for EPGs involves when the legislative, administrative and financing competences may well be and are allocated to different levels of government. It thus helps to understand that many EPGs should not be provided by the EU alone.
If one were to consider only the US-American-style federal state model for European federalism, few European common goods could be designed. In vertically cooperative federal states, on the other hand, the legislative, administrative and financing competences for certain public services are not always entrusted to the same level of government. This may entail connectivity problems. Nevertheless, an efficient allocation of tasks is created precisely for the many instances in which there are no EU administrative bodies locally and none should be contemplated. We develop a criteria matrix that serves as a guide for the tailor-made fiscal-federal design of a wide variety of EPGs.
The most important prototypes of the vertical allocation of competences are presented by means of four illus-trative scenarios. In fine-tuning such a design, we pay particular attention to the central financing of those European common goods which are administered locally by the Member States. This promising model is still quite fresh – and innovative – in federal practice.
With a view to the resurgent debate on the future financing of the EU, we also discuss the long-standing and contentious issue of juste retour. This issue symbolically and factually embodies one of the central hurdles that still distinguishes the supranational system of the EU from the "normal" top tier of a federal state. It will therefore only be solved consistently if key revenue instruments politically assigned to the EU are used to finance ser-vices with a visible European added value – i.e. genuine European common goods. The innovations in terms of EU taxes and common debt occasioned by NextGenerationEU and the EU Recovery Fund open up addi-tional possibilities here that would hardly have arisen without the great coronavirus crisis acting as an unwished-for catalyst for European progress.
This study was written by Michael Thöne, Director of the FiFo Institute for Public Economics hat the University of Cologne, and Helena Kreuter, researcher at the FiFo Institute, within the framework of the Reflection Group of the Bertelsmann Stiftung on the topic of European Public Goods.
You can find the corresponding Policy Brief in English here.