The financial crisis, the migration crisis, the pandemic, the war in Ukraine, disruptions in global supply chains exacerbated by our dependence on energy and raw materials: each of these challenges has made one thing crystal clear. We are better able to cope and to protect our fellow citizens when we are guided by solidarity.
Europe emerged from the still painful experience of the pandemic with decisive help from the massive NextGenerationEU recovery plan, the employment support fund “SURE” and the successful joint management of vaccines. But the energy crisis and rising social anger in a context of record inflation and astronomical gas and electricity prices has brought us to another crossroads. This is an opportunity to reaffirm – through determined action – the principles of solidarity and acting together.
We have given a strong European response to Russia’s aggression against Ukraine. Faced with Moscow’s use of energy as a weapon of war, we have succeeded in decoupling ourselves from Russia by diversifying our energy supply sources and increasing our strategic stocks in record time. Now we need to urgently address the cost of energy, which is heavily affecting households and businesses across Europe.
For businesses, we must pursue our coordinated efforts to help them preserve their competitiveness and jobs, while paying close attention to maintaining a level playing field within our internal market.
In this context, the massive €200 billion aid plan decided by Germany (worth 5% of its GDP) responds to a need we recognise and have highlighted - to support the economy. But it also raises questions. How can EU countries that do not have the same fiscal space also support businesses and households?
It is more important than ever that we avoid fragmenting the internal market, setting up a race for subsidies and calling into question the principles of solidarity and unity that underpin our European project. This is all the more true at a time when the United States is taking unprecedented measures to boost investments in the framework of the Inflation Reduction Act.
To establish a coordinated response on our side, and while the 27 member states are all raising funds to cope with the symmetrical shock of energy prices, borrowing capacity cannot be assessed based on their “observed” public debt alone. While this reference is and will remain the cornerstone of our common fiscal rules, it is of course not the only point to consider from a wider perspective.
For this reference does not take into account the political choices made by EU countries on key elements of common interest for Europe, which have created an asymmetrical burden on national budgets: the unequal efforts made for the defence of the continent; the under-investment in infrastructure, notably energy infrastructure, which should benefit everyone; the investments made to reduce the share of fossil fuels in a country’s energy mix, leading to a lower “debt in carbon emissions”. These are all investments for the common good. Taking these properly into account would give a more objective picture of debt differentials between states. It would also allow us to make more objective the debate on the management of public finances which sometimes tends to pit the good students against the bad, the virtuous against the spendthrift – when the reality is much more complex. This should be considered in the interests of justice and European solidarity.
Faced with the colossal challenges before us, there is only one possible response: that of a Europe of solidarity. In order to overcome the fault lines caused by the different margins of manoeuvre of national budgets, we must think about mutualised tools at the European level. Only a European budgetary response will allow us, by supporting the action of the ECB, to respond effectively to this crisis and to calm volatile financial markets. As we were able to do during the Covid crisis, it is up to us to establish - collectively and pragmatically - equitable support mechanisms that maintain the integrity and unity of the internal market, protect all European companies and citizens and allow us to move forward together in this major crisis. Taking inspiration from the “SURE” mechanism to help Europeans and industrial ecosystems in the current crisis could be one short-term solution. It could also pave the way for a first step towards the provision of “European public goods” in the energy and security sectors, which is the only way to provide a systemic response to the crisis.
Europe has already demonstrated that it can react forcefully by overcoming divisions and by pooling its budgetary power at the European level, in a way that shows solidarity and justice.
This is the essence of our European project.
Thierry Breton, is European Commissioner for the Internal Market
Paolo Gentiloni is European Commissioner for the Economy