“Europe was born in a crisis and will be forged in crises”, Altiero Spinelli used to say, convinced that European unity was “the political project of our time”.

27th December 2020 will probably go down in Europeans’ collective memory as the day when the Union, as it began distributing the vaccine to all its member countries, showed that it was capable of offering its citizens protection and acting as a united front against the virus, a common enemy which has had a devastating impact on our health and our way of life. Ursula Von der Leyen, the President of the European Commission, has stated that the vaccine will also be distributed to the Western Balkan countries (not yet members of the EU) and North Africa: this represents the first concrete step in a European foreign policy.

An institution that guarantees these “common goods” is already a state, albeit incomplete.

Faced with this huge global crisis, the European Union reacted promptly. Despite the handicap of a decision-making process that does not always allow majority voting, the EU has made clear political choices, equipping itself with the tools to face both the pandemic and the serious economic downturn generated by the lockdown.

Firstly, the prompt intervention of the ECB enabled the purchase of government bonds from the countries most affected by the pandemic. Then the Commission suspended the “Stability and Growth Pact” to allow states to go into debt to fund the first measures to support businesses and citizens; it also set up a “European unemployment scheme” (SURE) worth 100 billion euros.

But, above all, last May the Commission – which now increasingly resembles a “European government” – launched the Recovery Plan for Europe, whose name recalls the Marshall Plan (the European Recovery Program), the initiative that helped rebuild Europe after the war.   

As is known, the Plan is based on two instruments. The first is Next Generation EU, namely 750 billion euros in investments aimed at funding the recovery and, at the same time, managing the transformation of the European economy towards the energy transition and the digital revolution. The second is the increase in budget (from 1% to 2% of European GDP), and the addition of European debt securities (union bonds) to finance investments. New “own resources” for the Union are also in the pipeline, from a carbon border tax (to reduce CO₂ emissions), to a web tax (on tech giants), as well as the introduction of measures to combat tax havens and money laundering.

The Plan’s “political philosophy” is clear: to put Europe back on its feet and drive change, in the direction of the Green Deal and the digital revolution, to enable the Union to face global challenges on an equal footing with the other superpowers.  “Nation states are no longer the answer” is a sentiment shared by Angela Merkel, leader of the most important EU country, and Ursula Von der Leyen, representative of the “European government”: two women who personify the shift from national to European politics.

The Recovery Plan therefore represents a strong, united political response, which has made it possible to overcome the flaw that “hobbled” the Maastricht treaty (creating a currency without a state, as is generally said), teaming the euro with the first form of European economic policy: investments based on common resources, guaranteed by a stronger budget. In this respect, the Plan is therefore revolutionary: it marks the introduction of a European fiscal capacity, additional to and operating in parallel with that of the Member States. And all of this has been achieved without reforming the Treaties: the Union has thus strengthened its implicitly federal nature, upholding the principle that European solidarity is  possible if there is common control over the use of resources, guaranteed by common rules and institutions.

This philosophy also enabled the “compromise” reached at the end of the year, which establishes a link between the distribution of common resources and respect for the rule of law. Like all compromises, it is not entirely satisfactory, but it has allowed the resources of Next Gen EU to be linked to respect for the rule of law, removing the veto threatened by Poland and Hungary.

The objectives of the Recovery Plan are valid not only for Europe, but also the rest of the world, which has to find a cooperative, non-conflictual way of managing both the environmental crisis and the technological revolution. Europe is leading the energy transition and helping to write the rules for the digital revolution, showing people that there needs to be a “common sovereignty” over a number of global public goods, at the service of humanity.

A challenge from the Recovery Plan for Europe

The corona virus outbreak has provoked the most dramatic global humanitarian crisis in living memory. It forced a deep change in our way of living, keeping us apart from our friends and families and, most sadly, the casualties due to it keep climbing all over the world.

At the same time, the pandemic has triggered the most drastic world economic crisis of the last century. In response, central banks and governments have unleashed a series of unprecedented stimulus-packages to fight the downturn. Such measures are absolutely needed. Firstly, they provide vital support to workers, consumers and businesses, helping them to go through the emergency. And secondly, they are necessary to limit the economic scars, the lasting economic damages that persist even after the emergency-phase has finished and that limit the subsequent recovery.

But simultaneously, it is crucial to stay focused on the medium-term objective: the transition to a green and digital economy. In fighting the short-term damage caused by the pandemic, most governments have failed to subordinate the aides provided to any ecological requirements – even those given to the largest firms. It would be a terrible mistake rebuilding the economy as it was before the pandemic. Several industries used to rely on obsolete models and were already in decline: the outbreak has suddenly accelerated this trajectory. The fundamentals of our economy need to be reshaped, and we can’t afford to waste this occasion.

In fact, history is full of episodes like the one we are facing. Of course, not in the sense of recurring, widespread and highly deadly pandemics. But the economic shock generated is nothing particularly new. Over time, major events that disrupt the existing political and economic balance are quite common. Such events profoundly shape the development path followed by different countries or, more in general, by different geographic areas.

In this context, it is relevant to notice that the same initial shock can have – and usually has – very different consequences in terms of economic changes across different areas, depending mainly on the political and economic institutions which deal with it. Thus we have first to recognise that we are in the middle of such a moment, which means recognising that this tragedy must be used to push the transition toward a green and digital economy. Secondly and even more important, it is needed to put the right institutions in charge of leading this dramatic change.

The pandemic and the economic challenge are global issues and, as such, must be addressed accordingly. You can’t secure the U.S. if, say, the virus is still spreading in Mexico. Or it is useless if one part of the world cuts its emissions but the other keeps polluting heavily. This is to stress the importance of multilateralism and acting internationally in a coordinated way. Institutions like the WTO and the WHO should be given more institutional power; a world agency for the environment would also be welcomed. With the leading role of the European Union and the departure of Mr. Trump from the White House, improving the international coordination is possible.

From a pure economic point of view, a balanced and sustained recovery is achievable via inclusive institutions, capable of creating a level playing field and to encourage investments in new technologies and skills. In fact, the European Union has agreed earlier this year to a renewed institutional framework: the Next Generation EU, within a revamped EU budget. It is not just a matter of money. It is also a political turning point. In the coming years, the Union will work towards reforming the own resources system and introduce new own resources. Possible examples include a carbon border adjustment mechanism, a digital levy, the plastic tax and a Financial Transaction Tax. Moreover, the investments under the Next Generation EU will be approved and monitored by the European Commission, strengthening its political grip. These are the sort of changes required for a political federation to work properly. The declared aim of the Commission is to help the economy in the short run, but also (and mainly) to transform the economy, to drive its transition by incentivising creativity and innovation. Every economic shock brings destruction; but history suggests that often they actually bring creative destruction. It’s the politics’ responsibility to make this possible. The action of the European Union goes precisely in this direction.

A key element in moving toward a more sustainable economy will be the chemical sector, starting from the plastic industry, since it enters basically into every productive process. The research is making big steps ahead, particularly in producing basic chemicals from renewable sources. At the same time, examples abound from other industries as well. The textile sector is giving itself a series of stringent ecological parameters with the aim of limiting the emissions during the entire productive cycle. Also the agro-industrial sector is moving fast with new ideas and methods.

One of the crucial aspects will be to maintain an integrated approach to take advantage of the possible synergies between sectors and to avoid the so-called greenwashing: avoiding, for instance, the risk of simply shifting the environmental impact from one sector to another, or from one continent to another, instead of concretely eliminating it.

The objective of the European Green Deal is to make Europe a carbon neutral continent; but this goal cannot be reached at the expense of the competitiveness of the European industry. For this reason, the green revolution has to be based on the digital transformation of the economy and in general of the society. The technology is involved in all sectors and the digitalisation of processes and products is needed to gain competitiveness. In other words, the traditional economy should move toward a real smart economy.

Several examples stand out. The Ubiquitous Connectivity makes different sectors of society constantly connected to the internet; the Datafication transforms every aspect of our daily lives in data, from which useful information can be obtained; the Internet of Things, billions of objects simultaneously connected in order to provide data to be used for, say, reducing the emissions of a whole city, or helping an executive in charge of monitoring a productive process. The final goal of these – and several other – innovations is to interconnect as much as possible the physical world with the digital one, to create a smart economy and a smart society. To this end, the European Commission has proposed a new program, the Digital Europe Programme, with a budget of 9,2 billion euros for the 2021-2027 Multiannual Financial Framework.

Finally, also changing the personal behaviours will be very important. First of all, despite all the efforts we can make, the global temperature will continue to rise in the next years, before eventually we will be able to stop it. Everyone needs to adapt to a world hit by extreme natural events. The risk of low probability – high impact events must be taken more seriously.

Moreover, people need to adapt also as workers. New technologies require new skills; old jobs will be replaced by new ones. This is the concept of creative destruction that we have mentioned earlier. Even if this can create fear, especially among the low skilled workers, this is precisely how the economies should work. Moving towards more productive industries boosts the economic growth and the living standard over time. As said, it is up to the politics creating the right sort of inclusive economic institutions to minimise the short term costs and to accommodate this transition. The “Skills Agenda for Europe” will address this very important topic. Indeed, a research from Green Italy shows that companies investing in technologies and models oriented to environmental sustainability tend to be more productive. So, we are not talking about a distant and uncertain future; we already have the evidence that this direction is the right one.

As anticipated above, governing the economic change will be essential. The steps taken at European level are a very turning point. Until now, the monetary policy has been the only real federal instrument available. With the Recovery Plan, the common public debt and the new own resources, the fiscal lever is going to be introduced as well. Such common resources and the supervision of the European Commision make it possible to govern the economic change at federal level; this renewed institutional setting can activate a European economic policy, at this point in time focused on the green and digital transitions. Again, we need to stress the dramatic change the economy is going through and the importance of handling it. The political developments underway go in the right direction, since they add a genuine European fiscal capacity and the possibility to build a European industrial policy.

For the European Union the challenge is to develop the proper skills to be able to lead the energetic transition. This will show the rightness of the European integration and will allow to strengthen further the federal institutions, which is something badly needed especially in the current historical context. Not only for the correct functioning of the Europe Union itself. But also for the whole world. In the last 4 years the U.S. has turned inward and the EU has been the main advocate of multilateralism and international cooperation. Even if the hope is that America will return to a normalized politics starting from 2021, Europe should keep and reinforce its role. Now more than ever we need a world order based on a strong cooperation between the regional superpowers; the alternative is a world, at best, of isolationism and mistrust and, at worst, of open conflicts. The European Union has been able to keep at bay the populist movements in the last 2018 elections; now it can and must act for turning this tragic period in a starting point for Europe and the world.

Since the end of the Cold War, the interest of the two superpowers in the economic and political development of the African continent has steadily weakened. The new Chinese superpower has increased its involvement, but in neo-colonial form, exploiting mineral and natural resources, paid for with investments mainly in the transport network, to facilitate the penetration of Chinese goods in domestic African markets. In this period Europe has been practically absent, except in some local disputes, and it has mainly pursued its policies through bilateral relationships.

Things are changing radically with the explosion of the migration problem, now one of the main issues in political disputes between European countries. This also regards flows from the Middle-East and some Asian countries, but the main flow of migrants comes from the Mediterranean and Sub-Saharan area, with people travelling through the desert to the coast, where it is easy to find a boat to reach Europe.

To put the issue of controlling the flow of migrants into European territory into the right perspective, we must start with a brief analysis of the current state of sub-Saharan economies. From the mid-1990s, for about 20 years, most of the sub-Saharan countries saw high rates of economic growth. But since 2015 growth has slowed down, in particular for resource-intensive countries, mainly due to the terms-of-trade shock of 2014, when oil exporters faced the largest drop in real oil prices since 1970. For non-resource-intensive countries, growth has been more or less in line with forecasts. Nevertheless, on the whole, “by 2023 more than half of sub-Saharan African countries won’t see a narrowing in their per capita income gap with the rest of the world. And these countries are home to more than two-thirds of the region’s total population”[1].

In sub-Saharan Africa in 2019, income growth remained at 3.2 percent, and was estimated to rise to 3.6 percent in 2020[2]. Growth was predicted to remain strong in non-resource-intensive countries, averaging about 6 percent. If this had been the case, 24 countries, home to about 500 million people, would have seen their per capita income rise faster than the rest of the world. In contrast, growth was expected to be slow in resource-intensive countries (2.5 percent), meaning that 21 countries were expected to see a per capita growth lower than the world average. While in this setting it appears more and more difficult to generate jobs for some 20 million new entrants into the labor market every year, it must be underlined that some 40 percent of people in sub-Saharan Africa live on less than US$1.25 a day.

The current outlook for 2020–21 is considerably worse than expected and subject to much uncertainty[3]. This is due to a weaker external environment and measures to contain the COVID-19 outbreak, which has been accelerating in several sub-Saharan African countries over the past few weeks. Economic activity is now expected to contract by 3 percent in 2020, before recovering by 3.1 percent in 2021. This represents a drop in real per capita income of 4.6 percent in 2020-21, which is larger than in other regions. Across country groupings, growth is expected to fall the most in tourism-dependent and resource-intensive countries. Growth in non-resource intensive countries is expected to come to a near standstill. On average, per capita incomes across the region will fall by 7 percent compared to levels expected back in October 2019, coming close to those seen nearly a decade ago.

This outlook presents significant downside risks, particularly regarding the evolution of the pandemic, the resilience of the region’s health systems, and the availability of external financing. Policy makers aiming to rekindle their economies have limited resources at their disposal and will face some difficult choices. The region presents a large financing gap. Without significant additional external financial assistance, many countries will struggle to maintain macroeconomic stability and meet the basic needs of their people. The need for transformative reforms to promote resilience—including revenue mobilization, digitalization, and fostering better transparency and governance—is more urgent than ever.

Despite the slowdown in growth rates in recent years, the overall outlook remains promising, given that African GDP was expanding faster than the world average, and the existence of factors that will greatly help to increase the speed of economic growth in African countries. The first is rapid urbanization, strongly correlated to the rate of real GDP growth, because productivity in cities is more than double that in the countryside.

Africa has a large, young workforce, an important asset in an ageing world. An expanding working-age population is generally associated with strong rates of GDP growth. The employment of this workforce depends largely on the ability of African countries to fully exploit the huge potential of technological change. This in turn is strictly linked to a massive increase in investments aimed at creating human capital. Furthermore, Africa contains 60 percent of the world’s unused but potentially available cropland, as well as the world’s largest reserves of mineral resources.

The exploitation of this growth potential is mainly hampered by the shortfall in much needed investments in infrastructure. For instance, 600 million Africans are without electricity and lighting. The African Union has set up a continent-wide agency for electrification, which has come up with a plan to achieve 100% electrification in 10 years. Implementing this plan will require financial aid from the EU to the tune of 5 billion dollars yearly for ten years, which will provide the leverage for releasing the private funds of up to 250 billion dollars needed to fulfil the electrification plan.

300 million Africans are without access to clean water and only 5 percent of the available cropland is appropriately irrigated. But beneath the dry African soil there are reserves full of underground water: according to recent research by the British Geological Survey and University College London, the water reserves are 100 times greater than the volume of water available above ground.

The water supply could be increased by using new, technologically advanced, desalination plants. This opportunity could be exploited if the electricity required is provided through major investments in solar energy production.

Investments in water and energy, and the creation of human capital, are the first requirements for an effective African growth plan, which the European Fund for Sustainable Development should support, providing guarantees that could mobilize about 44 billion Euros in new investments. This flow of new investments would foster policies to deal effectively with the challenge of managing the increasing flow of migrants toward the European coast. But this plan has to comply with political requirements as well. One priority should be establishing political stability and security in the African countries that migration flows originate from.

In mid 2019 the total number of extra-continental African migrants was 26.5 million, i.e. 2 % of the total African population, but it should also be noted that in 2019 over 21 million African nationals lived in a neighbouring African country (up from around 18.5 million in 2015), and in the same year the number of African nationals living in different regions within the continent was nearly 19 million (up from 17 million in 2015). Looking at the ‘big picture’ of intra-African migration, policies and activities, will enable both the African Union and the European Union to formulate a comprehensively integrated, customized response[4].

Another reason for Europe’s increased interest in the future of Africa regards energy. Concerns about the issue of climate change and difficult relationships with the oil-producing countries have forced the European Union to come up with policies to progressively curb the use of fossil fuels and promote the exploitation of renewable resources. The Sahara desert is viewed as an inexhaustible source of solar energy, but exploiting this requires technological innovation and massive investments, as well as a commitment to foster security and political stability in the region.

Thus, the future of the European Union appears more and more linked to the growth – both economic and political – of African countries, with a new approach that envisages a close partnership between the two continents. This new policy not only requires many steps forward by Europe, but a new approach by African countries as well.

In the coming decades Europe is committed to greatly reducing the use of fossil fuels in order to achieve greenhouse gas neutrality by 2050, thus complying with the terms of the Paris Agreement of 2015. Clearly this reduction must be accompanied by an increase in the availability of renewable energy, and Africa is a potential source of green energy. Yet this energy will only be  available with strong investments and new infrastructure.

A Growth Plan with Africa requires full cooperation between the European Union and the African Union, and could prove to be the fulcrum of an ecological transition that will launch the two continents in the direction of sustainable development. European financial aid is unavoidable, but the initiative should remain in the hands of the African countries concerned. As General Marshall said in his famous speech at Harvard University on 5 June 1947, launching his plan for European recovery after World War II, “it would be neither fitting nor efficacious for the American government to undertake to draw up unilaterally a program designed to place Europe on its feet economically. This is the business of the Europeans. The initiative must come from Europe and the program should be a joint one”. This lesson should be remembered by the European Union now, when promoting the idea of a Growth Plan with Africa.

[1] IMF,Regional Economic Outlook, Sub-Saharan Africa. Recovery Amid Elevated Uncertainty, April 2019

[2] IMF,Regional Economic Outlook, Sub-Saharan Africa: Navigating Uncertainty, October 2019

[3] IMF,Regional Economic Outlook, Sub-Saharan Africa: A Difficult Road to Recovery, October 2020

[4] European Parliament, Directorate General for External Policies, Policy Department, Intra-African Migration, October 2020

The economic crisis of 2008 has demonstrated the naïve simplicity of the view that, if the economic policies of individual economies are geared towards domestic economic stability, and private actors are allowed to operate freely in such an environment, the global economy would work well. On the contrary, the said event has clearly demonstrated, on the one hand, how the markets’ self-correcting power suffers numerous limits and, on the other hand, how the search for economic stability requires a joint effort  by states, international and supranational organizations like UE as, due to economic and trade globalization, financial crises such as epidemics no longer know borders.

In the Book Stabilità economica e sostenibilità (published by Giuffrè-Lefebvre, Milan, 2020,432 pp),  the conceptual category of economic stability in its different forms (monetary, fiscal and financial) is reconstructed within the regulatory framework of international economic law. It focuses,  in particular, on the relative legal nature of global public good for the supply of which a plurality of public and private subjects and actors (states, international economic organizations, rating agencies, sovereign funds, multinational enterprises, hedge funds) are involved, operating on bases, perspectives and aims that do not always coincide and sometimes are even in potential conflict.

A public good[1] that – because of the properties that characterise it and the positive externalities it is able to produce – is in the common interest of all the subjects of international law and its different actors that make up the international economic community to commit themselves to its pursuit and supply. This, thus, ensures its widespread enjoyment for the benefit of all, while at the same time preventing dangerous opportunistic phenomena of free riding and moral hazard, which are at the root of many of the situations of economic instability occurred in recent decades. This is the position clearly expressed in 1999 by United Nations Development Program with its Human Development Report, in which it was highlighted how ‘global public good’: it is a particular type of public good  which  share  two fundamental characteristics: non-excludability and non-rivalry, differentiating themselves from purely domestic ones in force of three criteria: geographic (their positive effects extend over more than one group of countries), socio-economic (the effects concern both “rich” and “poor” countries) and generational, since they involve the whole Humanity.[2]

But the policies and stabilisation mechanisms adopted both at international and European level to overcome the current serious economic uncertainty and so to restore economic stability have been essentially inspired by a strict conditionality. In other terms, we are in front of solutions that have entailed and still entail significant costs if we consider the social repercussions that those choices have determined. Inevitably (see the Volume Stabilità…), many doubts and critical issues have been raised not only about the effective compatibility of those instruments with regard to the protection of economic and social human rights, but also about the limitations they have imposed on States, especially those most in need of economic and financial support in terms of exercising their (economic) sovereignty. This has also raised the question of how to reconcile democratic methods and technocratic solutions, especially when certain choices, that have a decisive impact on the lives of individuals and the various national communities, have been taken – partly because of the urgency of the moment – within fora and decision-making centres that lack effective democratic legitimacy.

The burden-sharing which the production of the stability good imposes would require, instead of making recourse to the traditional international method based on multilateral or plurilateral cooperation, to adopt the supranational one, through which the member states of an organization, such as the EU, decide to limit their sovereignty, attributing to the institutions of the organization the power to take binding decisions for all states members. But, the european model represents an unicum in the international panorama although there are some legal entities like the International Tribunal for the Law of the Sea (see UN Convention on the Law of the Sea in its part XV), albeit with limitations, defines a system of mandatory jurisdiction, as occurs also in the case of WTO dispute settlement system that seems to go in that direction so as to be considered as “…a body of transition from international law to supranational law, because it obliges countries that are not in agreement to reach a compromise on the basis of a defined process…”[3]

So, at the moment, with the significant exception of EU, the “production” of GPG at global level can essentially take place through cooperative and multilateral strategies above all based on the principle of differential treatment between developed and undeveloped countries, a concept that strongly characterises international economic law and international development law. In fact, as examined in the Book Stabilità, it reflects the need to consider not only the different material conditions that characterise the numerous situations involved, through a “gradation” of the obligations incumbent on them or through a better contextualisation of these obligations, but also and it intends to recognise the different level of responsibility of the different countries and economic actors in determining the conditions of economic instability and the direct and consequential damages that can derive from the latter situation for the International Economic Order considered as a whole. A situation that could be partially resolved if there was the will by states to reform the International Monetary Fund or even better to introduce an international agency responsible for the solution of financial crises based on the model of the International Seabed Authority (ISA) by which it has been introduced a mechanism for the management and control of activities related to the exploitation of mineral resources in the maritime area (outside national jurisdictions) as considered a global public good which protection is in the common interest of humankind.

Succeeding in implementing this aspect and, at the same time, combining economic reasons – especially those related to the balance of public accounts – with social aspects related to the defence of human rights is a very important challenge for States, for the international community and for the entire humanity. The need to go beyond gross domestic product and other economic variables that work around that figure to measure economic growth, development in general and, above all, the well-being of a society, is becoming increasingly necessary without, however, chasing utopian models of happy de-growth. In fact, the use of new indicators and the achievement of new goals and targets as set out in the UN 2030 Agenda for Sustainable Development go in this direction. For these reasons, as carefully analysed in the Book Stabilità, the implementation of the Principle of Sustainable Development can represent an opportunity for defining a new method that is used to achieve an effective balance between political and economic interests and social interests, in some cases, as noted, opposed to each other.

The said principle expresses not only a new vision in terms of behaviour and method of action, but, above all, it can be the means of reaching a fair compromise at international legal level between the need to ensure a stable economic and financial system and the defence of the economic and social rights of the person, at least of those rights considered essential. This is, as clarified in Book Stabilità, a good way for preventing new crises and above all protecting the interests of future generations, as the Brundtland Report – which has given impetus to the Principle of Sustainable Development – urges us to do.

[1] A public good is a good that is both non-rivalrous and non-excludable: that is, one’s use of a public good does not reduce the availability to others and one cannot effectively prevent the use by others. Consequently, two important features of public goods are that they will not be provided if left solely to the market, and that they tend to be consumed excessively when they are provided at all.

[2] The definition of global public good was then further clarified by the World Bank, with particular regard to issues related to the issue of development for which “global public goods are commodities, resources services and also substantial cross-border externalities that are important for development poverty reduction and can be produced in sufficient supply only trough cooperation and collective action by developed and developing countries” and subsequently in 2006 by the International Task Force on Global Public Goods, set up at the Johannesburg World Summit on Sustainable Development in 2002, for which global public goods are “issues that are boadly conceived as important to the international community that for the most part cannot or will not be adequately addressed by individual countries acting alone and that are defined trough broad international consensus or a legitimate process of decision making”.

[3] See Montani, Supranational political economy, New York, 2020, p. 26.

A turning point for Europe and the World

The coronavirus outbreak has shaken Europe and the whole world. It has put a stop to our most important freedoms, changing our way of living and working. Our healthcare systems have been put under severe stress and, most sadly, people have lost their loved ones.

The public health challenge quickly became the most drastic world economic crisis of the last century. Given the uncertainty of the situation, it is hard to provide accurate estimates of the economic slowdown we are facing. Anyway, the calculations of the European Commission suggest that overall the EU economy should shrink by more than 7 per cent in 2020, reaching even 16% in case of a second wave and extended new lockdown measures.

As expected, the European Central Bank (ECB) has been the first one to provide support to the economy. Under the Pandemic Emergency Purchase Programme (PEPP) initiated in March 2020, which is added to the older QE programme still in place, the ECB is due to buy 1.600 billion Euros in public and private sector debt in 2020, equivalent to 14 per cent of the Eurozone last year’s GDP. Moreover, the ECB is not buying assets in line with its Capital Key, giving instead more support to the countries hit hardest by the pandemic. The intervention of the ECB aims to provide the necessary liquidity and guarantee a smooth functioning of the financial markets.

Secondly, the European governments stepped in. The EU encouraged national supports by allowing the full flexibility in the budgetary and State aid rules. The European Commission took the decision to suspend the Stability and Growth Pact, based on the provisions included in the Treaties. As a result, the intervention has been of an unprecedented scale. This is surely welcome, since this package of measures provided vital support to workers, businesses and in general to the Member States’ economies in the first phase of the emergency.

Yet it is also a cause of concern since it risks to deepen the differences between countries and to provoke an unbalanced recovery. The main problem is that the economic crises has been symmetric in the sense that everyone has been affected, but it has been asymmetric in the magnitude of the resulting economic slowdown. In particular, the economies relying mainly on services, tourism, exports and composed in large part by small businesses have been hit much harder than others. Worryingly, this description fits best with the countries having higher government debt ratios, such as Italy, Spain and France. As a consequence, the fiscal stimulus provided by those relatively less affected by the pandemic (like Germany) are greater than the ones put in place by the countries facing the most severe economic damage.

In this context, it is absolutely necessary a European response. Acting at European level is the only way to ensure a fair and balanced recovery. The European Commission has proved to be well aware of this, and in May has officially proposed a new Recovery Plan for Europe, including an instrument called Next Generation EU, within a revamped EU budget. First of all, it can be argued that a larger EU budget is needed regardless of the current economic situation. Indeed, a large centralised federal budget is required for a currency union to work properly. In any case, history has shown that often dramatic events are needed to spur a decisive political action.

Next Generation EU

Specifically, the Next Generation EU proposed by the European Commission amounted to €750 billion – €500 billion in grants and €250 billion in loans to Member States. The European Council on July 21st decided to change the amounts to €390 billion in grants and €360 billion in loans, leaving the total to €750 billion. The funds will be borrowed on the financial markets and will be repaid starting from 2028 until 2058 through future EU budgets. In addition to the Next Generation EU, the Commission has proposed a revamped 2021-2017 EU budget, amounting nearly to €1.100 billion, which has been confirmed by the European Council.

The agreement reached by the national governments is a sort of watered-down compromise with respect to the initial proposal of the Commission, due to the unanimous approval required to pass the Plan (the perfect example of fake democracy that needs to be urgently reviewed). Nevertheless, this represents a historic moment for the European integration and its way of addressing common challenges. As a matter of fact, the crucial aspects of the plan have been confirmed by the Council: common European debt and new own resources. Now the hope is that the Member States will propose a set of credible reforms to be implemented with the upcoming funds.

For a detailed description of the actual programs proposed, the reader can refer to the documents released by the European Commission (the documents can be reached at the following links. “Europe’s moment: Repair and Prepare for the Next Generation”: https://ec.europa.eu/info/sites/info/files/communication-europe-moment-repair-prepare-next-generation.pdf. “The EU budget powering the recovery plan for Europe”: https://ec.europa.eu/info/sites/info/files/about_the_european_commission/eu_budget/1_en_act_part1_v9.pdf). Hereby a few considerations are made about the plan trying to highlight the most relevant aspects, which in fact make the European Union one of the global player most ready to affirm the liberal values and aware of the modern, global challenges we all are facing.

Firstly, it is worth noticing that the Plan includes both short term support and medium to long term investments. Indeed, although supporting workers and businesses is very important, it is not enough to provide a stable economic recovery. The immediate support has been provided mainly via the SURE program (temporary Support to mitigate Unemployment Risks in an Emergency), as well as by the measures taken by the Member States. These kinds of interventions are essentials to protect the livelihood of people in the short run.

But the Next Generation EU also recognises that a proper economic recovery requires new jobs to be created. Indeed, there are only two ways in which the economy can grow: by increasing the number of workers (more precisely, the total amount of time spent at work) and/or by increasing the output per worker (the output per unit of time). The EU acknowledges this by proposing a number of new investments capable of creating new jobs. In particular, it focuses on the European Green Deal and on the Digital Single Market. It is also important to bear in mind that this intention is not new, but it was already included in the program of the previous Commission (the Juncker Commission), resulting from the discussion between the Commission itself and the European Parliament. The pandemic has thus accelerated and made more urgent something already thought by the previous Commission.

It makes sense for the EU to focus mainly on these two topics. The two of them represent a shared interest of the whole European people, so a common coordination at federal level is welcomed. Moreover, such policies look at the present and at the future – and can serve as a guide for the world in two areas where a global response would be preferable. Preserving our planet is a duty we have for the next generation (or we can say even for ourselves, given the most pessimistic climate-change forecasts). And a deeper Digital Single Market is needed for a fairer and easier business environment, now and especially in the coming years.

The tech industry is object of a fierce debate. As of now, it seems hard to state that the tech giants represent a problem, since the users enjoy free and innovative services. But the point is that, first of all, such services are not really free, since users give up their data which are extremely valuable – a lot more than they can imagine. And secondly, the dominance of a few firms in an under regulated environment prevents smaller businesses to grow and compete. In the long term, the lack of competition inevitably results in less innovation, less grow, and more inequality. Thus, the Commission stresses the importance of striking a balance between the free market and the need to prevent the abuse of market power and to ensure a fair market place for potential competitors. The importance of a Data Act is also highlighted, to handle data sharing across Member States and sector.

Another relevant aspect is the need to retrain workers. The pandemic has accelerated a trend that was already in place, in which some sectors of the economy are losing importance at the expense of others. As a consequence, workers need to acquire new skills and to adapt to the new jobs. It is somewhat understandable that this process can create fear, especially among the low skilled workers. But this is precisely how the economies should work. Moving towards more productive industries boosts the economic growth; in turn, this improves the living standard over time. It is up to the politics creating the conditions to minimise the short term costs of this transition. The “Skills Agenda for Europe” (another point of the Recovery Plan) will address this very important topic.

The issue of public debt is also very telling. The common eurosceptic argument among the southern States goes that the European Union is obsessed by the public debt and is against it in any circumstance. If this can be the case for the group of countries that defined themselves as “frugal”, the Commission has instead shown a different approach. As said, the Next Generation EU will be financed on the financial markets, i.e. by public European debt. Here the Commission is making a crucial point. First of all, the deficit spending is useful to help the economies to escape from a recession; this has been immediately clear when the Escape Clause has been triggered. And secondly, the public debt is desirable when it is used to finance long term, structural investments – as the ones proposed in the Next Generation EU. As a matter of fact, the benefits of the plan will be released over the years, so it makes sense to pay for them over time as well. In other words, the payers and the beneficiaries of the investments tend to be the same. On the contrary, the EU opposes the deficit spending for financing current expenditures, since the next generations are left with the burden of more debt but with no benefits at all.

A special consideration has to be done for the implications of the European bonds, whose guarantor will be the EU budget that needs to be expanded accordingly. A first way to do this would be an enlargement of the contributions by the Member States. But this is not a desirable method because basically it would translate in an increase of the national debts. The Commission has therefore proposed a number of new own resources, such as a Carbon Tax based on a Carbon Border Adjustment Mechanism, a new Digital Tax building on the work done by the OECD, and the proceeds from fighting the fiscal dumping and money laundering. Fortunately, such proposals have been accepted by the European Council. It stated that “the Union will over the coming years work towards reforming the own resources system and introduce new own resources”. As examples, it cited a carbon border adjustment mechanism, a digital levy and a Financial Transaction Tax (the final document released by the Council can be found here: https://www.consilium.europa.eu/media/45109/210720-euco-final-conclusions-en.pdf). This aspect of the plan is truly revolutionary: it marks the beginning of a genuinely fiscal capacity of the European Union, which is added and works in parallel to the one of the Member States. This has been possible by taking advantage of the “implicit” federal powers of the EU, without reforming the Treaties. Some observers are finally referring to this as the European “Hamiltonian moment”.

Last but not least, Europe will pursue a model of “open strategic autonomy”. By this term, the European Commission means to reduce dependency and strengthen security of supply in areas like pharmaceutical or raw materials. Far from having a self-sufficient spirit in general, the Commission wants instead to create an environment more protected by future shocks in certain key areas. In order to make this clear, the word “open” stands to indicate the commitment to open and fair trade, as well as to international cooperation and common solutions for shared global questions. One of the most misguided concept of the sovranist parties is that international trade and in general international affairs are zero-sum games in which one country can gain only at the expense of another. This is just wrong. Everyone has to gain from fair trade and international cooperation. The Commission is thus pushing for a stronger Europe in the world, capable of leading the global response working closely with the international organisations, as it is actually already doing. The necessity of addressing certain issues at global level is arising, and the EU is in fact stressing the need of a global sovereignty in such key areas.

European Parliament calls for paradigm shift

Ahead of the presentation of the European Commission’s “Chemicals Strategy for Sustainability”, announced for October 2020, the European Parliament was called on July 10 for a tightening of chemicals policy and concrete ban on toxic chemicals in a resolution initiated by the Greens/EFA Group. Endocrine disruptors in cosmetics, toys and food packaging and long-lasting fluorochemicals in coatings on drinking cups, pans and clothing have to be banned. The text has been adopted with a large majority of Christian Democrats, Socialists, Liberals, Greens and Leftists, and they called on the European Commission to tighten the European chemicals law REACH. The same standards should apply to new products and products made from recycled materials, so that no dangerous chemicals are kept in the circular economy.

The protection of human health and nature as well as the planetary boundaries are at the core of today’s resolution. In the future, all forms of pollution should be prevented or reduced to a level that is no longer harmful to human health and the environment. The upcoming EU’s Chemicals Strategy for Sustainability should also take into account resource depletion, energy use in chemical manufacturing, health, social and environmental standards, and human rights along the supply chain.

The European Parliament’s resolution shows the way forward for the European chemical industry. The chemical sector should not fare like other key European industries. The best products must continue to be produced in Europe. The ambitious, sustainable chemicals policy demanded by the European Parliament is therefore an opportunity for industry to invest in future-proof and crisis-proof technologies.

Toxic chemicals are suspected of causing cancer, can adversely affect human development, reduce the effects of vaccinations, increase the risk of infection and cholesterol and lead to a reduced birth weight of children. Parliament’s resolution comes just a few days after the German Environment Agency warned of more and more chemicals in the blood of children. For every fifth child, long-term damage from exposure to the extremely long-lived group of per- and polyfluorinated alkyl substances (“PFAS”) cannot be excluded. The parliament today calls for the use of all 4700 PFAS substances to be banned in all non-essential applications.

As part of the European Green Deal, the European Commission announced in December 2019 its ambition of a “zero pollution ambition for a toxic-free environment”. An important element of this ambition will be the “Chemicals Strategy for Sustainability”, which is to be presented by the Commission in October 2020.

MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:

“We are calling for nothing less than a paradigm shift in the chemical industry. To protect our health and the environment, we have to start the ecological transition the chemical industry. We need a zero tolerance strategy for toxic chemicals in Europe. A strengthening of the European chemicals law is necessary. It must finally also regulate polymers such as plastic. It is unacceptable for environmentally harmful plastic to fall through the grid. The European chemicals law must become more efficient. Instead of laboriously banning one dangerous substance after the next, we should tackle substance groups as a whole. In this way, we could prevent toxic endocrine disruptors such as Bisphenol-A from being replaced by the almost identical Bisphenol-F or S. The Commission must now present criteria for sustainable chemicals and set concrete targets for reducing energy and resource consumption.

The precautionary principle and the protection of people and the environment must guide the European chemicals strategy. The zero pollution ambition benefits a toxic-free environment and healthy consumers. Sustainable chemical policy not only protects our health. It is also an opportunity for the European chemical industry to invest in future-proof and crisis-proof technologies. Clean chemistry “Made in Europe” makes European industry future-proof. Only a sustainable industry can remain competitive and secure the 1.2 million jobs in the European chemical industry.

Europe has the best chemicals legislation in the world. In practice, however, enforcement is lacking. Member States must finally implement REACH consistently to help the best products penetrate the market ”

Link to the text of the resolution (no major amendments have been adopted): https://www.europarl.europa.eu/doceo/document/B-9-2020-0222_EN.pdf