09 April 2024

EURACTIV: Recovery fund should be ‘blueprint’ for permanent joint borrowing, EU Commission economy chief says

The EU’s economic chief Paolo Gentiloni officially called for turning the bloc’s Recovery and Resilience Facility (RRF) into a “permanent” resource on Tuesday, saying the “temporary nature” of the programme has so far prevented it from unleashing its full potential.

Gentiloni warned at an RRF meeting between the Commission and the Belgian presidency of the Council that an annual additional investment of €650 billion was needed for the bloc’s digital and green transition, adding that “new priorities have come to the fore,” such as increased spending on defence and reconstruction of Ukraine.

The EU Commissioner for the Economy said the RRF will help fill that investment gap until it expires in 2026, “but of course, our investment needs do not end [then]” he added.

“I have no doubt that the EU would benefit hugely from a permanent, safe asset commensurate with the size of its economy, and this will be a big issue to discuss for the next Commission,” said Gentiloni.

“I am equally convinced that our end goal should be the establishment of an EU-wide central fiscal capacity,” he said, adding that this was “crucial to provide European public goods in areas such as energy, innovation and defence.”

Gentiloni’s backing for a permanent EU-funding programme was echoed by Belgian state secretary Thomas Dermine (PS/S&D), who warned that the bloc’s ability to channel funds into green investments is impacted by reformed fiscal rules – known as the Stability and Growth Pact, whose revision was agreed upon in February after some tough negotiations.

Room for flexibility within the new EU fiscal perimeters will be “quite limited,” said Dermine, warning that “in most member states, we won’t have enough budgetary capacity to fund those investments.”

“So the only solution is […] that, basically, the type of instrument that we created together with the RRF will need to be replicated in the coming years,” he added.

Gentiloni and Dermine’s statements on Tuesday mark a shift away from previous EU rhetoric around the need to rely on private financing for the green transition – and to therefore strategically focus on shoring up the integration of capital markets.

In line with negative feedback given by economic analysts, Dermine said private investment will not be enough.

“Of course, we need to stimulate private capital markets,” he said, “but let’s be clear: If we rely solely on green capitalism to make it work, it will be too little, too late.”

EURACTIV

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