Will NextGenerationEU assist Europe’s cohesion?

Daniele Archibugi

Addressing Europe’s huge challenges requires treating Europe as more than the sum of its national parts.

The NextGenerationEU (NGEU) public-investment programme has demonstrated that European governments need not be merely guardians of austerity and financial stability but can prioritise development and employment. After so many years in which the EU institutions were known in the national media of the ‘debtor’ member states as the advocates of welfare downsizing, in mid-2020 this represented a U-turn on their part.

True, governments themselves were responding to the onset of the pandemic—a major social crisis—and many nations, including the United States and China, had to introduce similar large investment plans. But after so many years in which the main concern of the EU had been to limit public expenditure and to impose austerity policies on its member countries, NGEU showed it could also open up fresh opportunities and new markets.

Lack of capacity

Indeed, NGEU would have been necessary even without Covid-19. In large parts of the EU there was a lack of capacity which needed anyhow to be built through exogenous investments.

Back in 2011 the radical economists Stuart Holland and Yannis Varoufakis suggested creating eurobonds—government bonds jointly guaranteed by the eurozone—with a view to supporting investments in infrastructure, especially in the periphery of the customs union. As it happened, a different direction was taken after Mario Draghi, as president of the European Central Bank, pledged the next year that the single currency would be defended, ‘whatever it takes’ .

The pandemic has returned Europe to the same crossroads, but with a much wider problem—not just to save a currency but to support real economic activities. Will the €750 billion to be injected into the European economic circuit manage to build the EU as a cohesive political community? The way in which the financial resources have been made available casts some doubt.

National implementation

NGEU in fact provides credit lines for national governments to allocate and distribute. Yes, of course the EU will monitor the situation and refund member states after the resources have been spent. And it will make sure that the projects are duly implemented. But it will empower national and local administrations for the projects, rather than supranational institutions. The money provided, in grants or loans, is European, but the implementation is national.

Compare NGEU with two other long-term EU schemes: the structural and investment funds and the framework programmes for research and technological development. While the first are administered nationally and locally, and there is little international collaboration, the framework programmes have always been based on the idea that it was necessary to build networks among partners from different nations. It is not difficult to understand why the two schemes are so different.

Structural funds are designed to counterbalance the centripetal force of a customs union and to help peripheral areas build infrastructures which will allow them to compete on a par with the central areas (or at least with less disadvantage). Roads and bridges, as well as the upgrading of human resources, should be work on the ground.

Conversely, framework programmes are devoted to science, technology and innovation. It is crucial that peripheral areas actively participate in projects which will otherwise tend to be carried out in universities, research centres and firms of excellence located in the centre of the EU. The benefits must be widespread across the whole European economic space—and that demands international collaboration.

Empowering governments

From the outset, NGEU was designed to empower governments. And there are great differences across member states in how they are deploying the funding. For example, Germany and France will devote 32 and 22 per cent respectively of their NGEU resources to research and development, while in Italy and Spain this will comprise only about 5 per cent.

There are different specialisations across EU countries but a major problem emerges: how will it be possible to disseminate the good practices thrown up by NGEU across the whole European area? Can the scientific discoveries, technological innovations and new methods and systems which arise from meeting the objectives of NGEU be made available from Lisbon to Vilnius, from Valletta to Helsinki?

This is the great challenge the EU should address in the coming years. NGEU will formally terminate in 2027. But before declaring if it has been successful or not, it should be assessed not only on whether it has achieved its targets but also as to whether these achievements have been comprehensively distributed across the continent.

The old objective of cohesion needs to be incorporated in NGEU—and any successor—with practical schemes to promote it.


This short article appeared in the Social Europe blog on January 16: https://www.socialeurope.eu/will-nextgenerationeu-assist-europes-cohesion