The EU summit this week will determine whether Europe utilises the next Multi-Annual Financial Framework for future technologies, climate action, and resilience, or remains deadlocked in disputes over cuts. The deciding factor should be European added value, not the net balance.
The lack of ambition in German European policy is once again being demonstrated in a striking way these days. At the European Council summit on Oct. 15 and Oct. 16, negotiations on the next Multi-Annual Financial Framework (MFF) will enter a decisive phase.
And just like seven years ago, the positions are deadlocked. Germany and other so-called “frugals” – that is, net contributors who insist on budgetary discipline – are demanding cuts of several hundred billion euros and fewer transfer payments such as structural and cohesion funds. The debate thus remains dominated by a logic of net balances, even though the European Commission has long since addressed a key German demand with the Competitiveness Fund.
Insisting on cuts nonetheless is the opposite of a vision for Europe. Yet, it is precisely in Europe that the sovereignty lies with which Germany can stand its ground against the enemies of liberal democracies. Germany needs Europe more today than ever before. An unambitious, minimal consensus, on the other hand, undermines the legitimacy of pro-European forces. What is needed is the courage to build a better Europe, as called for by Zeit journalist Ulrich Ladurner.
The benchmark for the budget must be European added value, not the net balance. To achieve this, we must first recognize that the single market does not operate according to a net balance logic. It is the most important and growing market for German exports, particularly as a counterbalance to declining exports to China. Research using Austria as an example also shows that EU investments in other EU countries can stimulate growth in the domestic economy through the single market.
Second, we need an understanding of European added value based on four pillars:
- Individual member states would not implement without EU intervention
- Demonstrate positive economies of scale
- Are cross-border in nature
- Contribute to the EU’s strategic priorities.
These include environmental and social policy aspects. Examples include the expansion and interconnection of renewable energy sources and transportation infrastructure, the promotion of innovation as well as clean and digital technologies of the future, integrated public procurement, climate action and climate adaptation, the promotion of biodiversity and uniform environmental standards in agricultural policy. Equitable structural change in coal-mining regions and investments in education and training also create European added value because they strengthen employment and productivity.
Structural funding, in particular, is often most visible in people’s everyday lives. It thus strengthens trust in the EU and in pro-European parties. The potential for this is there. The European Commission’s proposal highlights new priorities: the decarbonization of industry, scaling up future technologies, digital infrastructure and security and resilience, as well as research and innovation.
To ensure these priorities do not come to nothing, four points are now crucial:
- The German government should support the funding level proposed by the Commission as a target and participate constructively in the search for new EU own resources.
- The €409 billion EU Competitiveness Fund should be specifically geared toward establishing and expanding Europe’s pioneering role in critical future sectors such as green technologies.
- The plans for national and regional partnerships (NRPPs) must be refined so that implementation at the national level does not turn into a dog-eat-dog environment where less visible priorities come up empty-handed. This requires binding earmarking for climate and environmental measures.
- A uniform, transparent and goal-oriented performance regulation avoids a patchwork of regulations and provides clarity for implementation – particularly at the state level.
The MFF’s currently proposed budget is too small to fund the necessary changes. Even with the €2 trillion proposed by the European Commission, the MFF will not be sufficient to achieve the necessary public investments in future technologies and industrial renewal at the required scale and pace.
Therefore, in addition to the MFF, instruments are needed to support “coalitions of the willing” for joint industrial policy projects. These should be earmarked for promoting innovation, scaling up and the deployment of green technologies, and should create incentives for their use – for example, by providing cheaper capital or streamlining state aid approval processes.
The meeting of heads of state and government is therefore about more than just a budget. It is about laying the foundation for an EU that can respond to current and future shocks. Only through ambitious, strategic deepening – backed by adequate financial resources – will a better Europe be possible, one that is more capable of taking action and can once again secure political support.
This piece was first published in German on Table.Media.
