Opinion

Europe can take a bigger role in providing public goods

The EU should invest where it can deliver more value than member states acting alone.

By: and Date: December 5, 2019 Topic: Macroeconomic policy

Now that the EU has a newly elected parliament and a new commission, what should be its agenda for the future?

Traditionally, its focus has been on economic integration, for example through the single market, the euro or banking union. There are some common policies, but overall the EU budget is small and mostly spent on agricultural subsidies and transfers to poorer regions. European integration delivers benefits, but it is not a sufficient answer to the challenges Europe faces today.

Times are changing. The race for new technologies intensifies; Europe can no longer rely on the US for its defence; rivalry between the US and China is reshaping international relations; national migration policies fail to cope with pressure; there is need to change gear on decarbonisation. Such challenges require a new division of labour between European and national levels.

The response should be not “more Europe”, but to select fields where there is a potential to provide European public goods. The EU should take a bigger role in policy areas where it delivers more value than member states acting individually can. This is the case where economies of scale are important or where the outcomes of policies in one country strongly affect others.

One area where the EU already has key competences but should do more is international economic relations. It is time to end official indifference to the use of the euro beyond our borders, and to make it attractive globally through the granting of swap lines to partner central banks and the introduction of a common safe asset. In investment policy, when security is at stake, the EU should have the power to block foreign investment by qualified majority.

To mitigate climate change, there is great potential for joint action. Without waiting for a European carbon tax system, the EU should be able to set, by qualified majority voting, binding limits for carbon prices. This would allow it to comply with its international obligations at the lowest possible cost.

Cyber attacks ignore national borders. The EU needs to pool its resources to protect and preserve its digital infrastructure. A high-level group should be mandated to propose a strategy for safeguarding Europe’s digital sovereignty.

Technological leadership requires investment in research. A European Darpa should focus exclusively on path-breaking projects, and be able to terminate unsuccessful projects abruptly.

Refugees come to Europe, not to a particular member state. A solution to the migration crisis should include a common border protection system, a common legal framework for asylum, common principles for allocating people granted asylum, and policies for resettling those to whom immigration has been denied. Eventually, the Schengen area and the common migration policy area should coincide.

Development co-operation and financial assistance to third countries is another policy area with strong spillovers and size advantages. Chinese inroads into Europe have made the case for a united stance and a European development bank stronger. Europe should also get its act together on foreign policy and external representation as well as military procurement and defence. The case for a European foreign policy is strong, but there are deep policy divergences between members.

Efforts to strengthen European soft power, savings-oriented back-office co-operation, and regular European foreign policy “white books” would be practical steps. On defence, efforts should be made towards common procurement and arms export policies and joint defence initiatives.

Achieving all this will not be easy. First, it requires funding. A new focus on European public goods should not result in an increase in the overall tax burden for EU citizens, but shift resources to the European level.

There is an ongoing debate about new financing instruments for the EU budget. But the provision of these public goods would be delayed if it were to be linked to a reform of EU finances. For the time being, new public goods should be funded through higher gross national income-based resources.

Second, acting at the EU level is only possible if the preferences of the member states are not too different. In areas where they differ significantly, some countries will move first and others may or may not follow. Germany and France should take bilateral initiatives where necessary, always inviting other countries to join in.

Third, critics will complain that more European public goods provision will undermine national sovereignty. But this view is often just complacency in disguise. In the policy areas discussed, the choice is not between national and European sovereignty. It is between European sovereignty and none at all.


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