Few geopolitical events have shaped AB’'s policymaking as deeply as the COVID-19 pandemic and the war in Ukraine. The joint response of the Brussels institutions to these unprecedented challenges dominated and determined the five-year agenda and achievements of the current Commission and EU parliament. The first was the huge €800 billion NextGenerationEU fund, designed to accelerate the bloc's post-pandemic recovery and transition to green and digital. For the first time, member states were seen issuing common debt; Even at the height of the financial crisis that broke out in ’ in 2010, the so-called ‘-friendly countries were a truly historic development that ’ had previously vigorously resisted. One of the key mechanisms within the NextGenEU fund was the Recovery and Resilience Facility:
COVID also forced Brussels’i to temporarily abandon its financial borders, another radical step. Since then, many member states have reached record debt/GDP rates; This is a problem exacerbated by the energy shock and high inflation in the 2022’. High spending levels were envisaged as a key component of the bloc's efforts to emerge from the pandemic emergency, but now these levels cast a shadow over the bloc's future spending goals aimed at achieving green targets.
TOWARDS DEBT CONTROL
The recently revised spending rules aim to gradually bring them back under control. April 30, 2024A new framework for economic governance comes into force in ’. The Commission says the main objectives of the new framework are to strengthen the debt sustainability of “ Member States and promote sustainable and inclusive growth in all Member States through growth-enhancing reforms and priority investments. “The framework supports progress towards a green, digital, inclusive and resilient economy, helping AB’ to be more competitive and better prepared for future challenges, ” adds.
The rules mandate a return to old threshold values, such as deficits of 3’ per cent of annual GDP and debt of 60’ per cent, respectively, but significantly different from the previous regime, member states were given more flexibility in how to act on debt reduction.
BALANCE WITH DEBT INVESTMENT
Allegedly, this approach will put the debt on a downward path, adhering to established financial guarantees. The new framework “facilitates and encourages Member States to implement the measures needed to secure green and digital transitions, strengthen economic and social resilience, and strengthen the security capacity of Europe’.”
The policy comes into force as AB’ prepares to exit its uniquely problematic five-year parliamentary term and enter a new one. In the coming cycle, post-pandemic funds are expected to expire in 2026’; This will be a serious test for the new debt control framework and will also reveal how well European ’ is investing in the transition to a green future and competing with global competitors, especially China.
