A five-year cycle of turmoil; From COVID-19’ to the war in Ukraine’ and the resulting energy shock and rising inflation, the European economy has been rocked by an unprecedented series of crises over the past half-decade. As AB’'s Economic Commissioner Paulo Gentiloni’ put it: Referring to the highly improbable sequence of events such as the pandemic and Russia’'s invasion of Ukraine’, no one could have predicted that we would experience two Black Swans in a row.“
As Europeans prepare to go to the polls for parliamentary elections in June, the Real Economy is assessing AB’'s economic performance in this difficult period and its prospects for a recovery in the next period. How can the bloc boost growth and productivity, is the Green Deal still on track, and does trade relations with countries like China need to be reset? These are the big questions facing voters who are preparing to give EU institutions a new mandate.
Desperate times, desperate measures
At a time when desperate times demand desperate measures, AB’'s response to numerous crises has hitherto reached unimaginable proportions; The huge €800 billion New Generation EU fund was a historic economic gesture. This program, implemented to accelerate the bloc's post-pandemic recovery and green and digital transition, saw member states issue joint debt for the first time.
But COVID has also forced Brussels’i to temporarily leave its fiscal borders. 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’. The recently revised spending rules aim to gradually bring them back under control. Post-pandemic funds will also end in 2026’, and now the real question is: Will Europe have the money it needs to invest and compete for the future?
EU Commission President Ursula von der Leyen, “What started with a virus too small for your eyes to see has turned into a huge economic crisis that you can't miss.
A shared burden
The platform for combating this crisis was the debt-sharing program envisaged under the NextGenerationEU fund. So, four years after its inception, how do MEPs view such a financial instrument? Do they see this as a successful plan for the future, or should it turn into an economic taboo?
Renew Europe Group’tan Renew Europe Group’tan Stéphanie Yon-Courtin Real Economy’ye said: “For the first time in this war between conservative countries and Club Med countries, we never thought we could agree on a common debt, and this is a historic event.”
According to Philippe Lamberts’e, a member of the European Parliament and co-chair of the Green Group, the fund offers the possibility of intercommunal cooperation in the future: I see “NextGenEU’ as a prototype. And it's important that the prototype flies well so we can make it truly permanent.”
His vision is also shared by deputy Margarida Marques of the ’ Group of Socialists and Democrats, who sees the vehicle's potential to achieve Europe’'s long-term goals: “NextGenerationEUAfter ’, a new investment mechanism should be created to invest in climate transition, digital transition, European Pillar of Social Rights’na and defense.”
But the figures on the right have a slightly less utopian view: “Right now, if you have high-indebted countries, but they can benefit from this new box of Pandora’, which is a European common debt, if they can benefit from it, this creates a whole new game when it comes to finance, so we believe that this is a mistake and we shouldn't go down that road, said Michiel Hoogeveen, a deputy from the European Conservatives and Reformists Group of ”.
So what is the position of the EU Commission’? Will he be able to use these economic tools again? The fund is an expression of AB’'s fundamental concept of closer unity, European Commissioner for Economic Affairs Paolo Gentiloni believes: How can we participate in the global race for clean technologies, against the challenges of competitiveness, without even a single euro of co-financing? I think it's really impossible. - ”
Will you be struggling with debt or will you be borrowing money to invest?
However, whether it is jointly undertaken or undertaken, the debt must always be checked. The recently revised financial rules aim to reduce debt generated during the pandemic. This meant a return to old threshold values, such as deficit, which is 3% ’ of annual GDP and debt, which is 60 percent ’, respectively, while member states were given more flexibility on how to act on debt reduction.
But will there be enough money to pay for things like the green transition, especially with post-pandemic financing ending in 2026’? While investment is necessary, unlimited borrowing is not a solution to achieve it, writes Manfred Weber, President of the European People's Party: On the “ Debt side, you know, we struggle with that a lot. At the moment, nobody knows how to pay interest rates, says ”.
That's why debt means fewer opportunities for the next generation to invest. We need economic growth, this is the power base of Europe’, we are economically strong and we need to restart the engine.”
For Gentiloni’, Europe's debt burden should not distract from the critical need for investment: In general, we cannot say that the problem of the EU and the Eurozone is our very high debt, it is a problem for the single member states, we have to address it, we have common rules, but at the same time we have to compete at the global level.
For ’den Philippe Lamberts’, keeping up with AB’'s global competitors is even more important: If you want the green transition, digital, defense and all other investments to happen, yes, we will have to borrow because not all of them will be financed by cuts or new taxes elsewhere, and in fact some of them should be national borrowing, and some of them should be co-indebted by the European Union.
Analyst Jeromin Zettelmeyer, director of the economic think tank Bruegel, believes that Brussels’ will continue to share debt as a tool to achieve its primary goals. “I think the idea of you supporting public investments at the EU level will continue reasonably, because otherwise we could probably give up on the Green Deal’.
Dealing with China
While EU policymakers face an uncertain future, trade tensions with China are another hot topic. Brussels has accused Beijing ’i of subsidizing key sectors while restricting access to its own markets. For now, the European Commission’'s policy was to buy ’risk from China‘, but will it have to go further? Peking’in must be convinced of the benefits of working with Europe, reformed MEP Stéphanie Yon-Courtin believes: “It should be a win-win-win situation, says ”.
“First of all, the European Union must stop being naive. The relationship should be between commercial partners and, of course, should continue to work with partners as long as they agree to our rules.”
Michiel Hoogeveen, Member of the European Parliament from the European Conservatives and Reformists Group ’, believes that cooperation with China should be explored: Let's go and try to talk to the Chinese, let's really talk about how we can create [an equal playing field], how we can make deals, and also recognize that a country can be more competitive in building maybe electric vehicles, maybe solar panels or wind turbines. Well, if the Chinese are willing to pay for our energy transition, then we are also willing to pay for our own energy transition.” sources in other areas, says ” Hoogeveen.
But the view on the left is more cautious. Margarida Marques, a member of ’'s European Parliament, believes that before China can open the door to ’, Europe must establish its own order: “ In order to compete with other economic areas, we must be a bloc, an economic bloc, and for this we must ensure that the domestic market can work in this direction.
Greens’den Philippe Lamberts “First stop being naive” says. I mean, China is protectionist, the U.S. is protectionist, and we, “pekala, shouldn't restrict access to our market because they're going to restrict access to theirs. They're restricting access to their markets!
Manfred Weber, chairman of the European People's Party, agrees that future trade relations with China will likely be complicated: “We need to maintain economic ties, so no one wants to stop them, but we need to rebalance this and be ready to defend our markets in such a strategic battle with the Chinese.
Stability and growth prospects
Finally, given the great challenges faced by the European ’ in recent times, what is the current economic picture?
Jeromin Zettelmeyer, director of the Bruegel think tank, says “Inflation is falling. “ECB expects to return to the target earlier, and they expect to unwind in the next quarter. Therefore, there is a feeling that there will be a recovery in the summer months, and the main factor here is the recovery of real incomes and the growth of wages with the fall of inflation.”
The future may be challenging, but European Commissioner for Economic Affairs Paolo Gentiloni believes the European Union is on the right track.
The response to the “ Outbreak was unprecedented in the – SURE mechanism, NextGenerationEU. The response to the war was unprecedented. Unity on sanctions, political reaction and separation from Russian gas. But if we see the acceleration of activities in 2024’te, I think we will come to the conclusion that we can properly address these two black swans, says ”.
In fact, we can all be forgiven for hoping that the next election period will be less turbulent than that.
