The EU must play a fundamental role in coordinating the macro-economic response to the COVID-19 crisis, relying on a well-designed Multi-Financial Framework (MFF) allowing the materialisation of a fully-fledged unprecedented investment plan, as well as a dedicated Recovery Fund and related tools.
EU leaders gave to the Presidents of the European Council and of the European Commission the vital task to work on a Roadmap to recovery. CEEP believes that the EU must play a fundamental role in coordinating and guiding macroeconomic policy, stimulating the use of fiscal space and enhancing the necessary investments to tackle our main challenges whilst boosting economic growth across our Union – which has been considerably subdued even before the pandemic.
In times of crisis and uncertainness at Member State level, in businesses, in health and elderly-care, and other SGIs, and at the level of citizens, the EU should spread confidence in the economic and political future of the European Union. It is – as a result of the insights of the psychologic economy – widely accepted that psychological factors have an enormous influence on politics and markets. The creation of confidence as a mobilising element should accompany any recovery measure.
In order to do so, the EU must put forward a well-designed Multi Financial Framework (MFF) which will allow the materialisation of a fully-fledged unprecedented investment plan. The success of this initiative is paramount and must reinforce our engagement with the promotion of social fairness and environmental sustainability. Properly investing in schools, hospitals and digital infrastructure – in some Member States also energy, water and waste infrastructure – is indispensable, not only to ensure resilience against eventual shocks – as it has been demonstrated by the present crisis – but also for economic prosperity in the long-term.
The main tool for the recovery should be a revamped MFF 2021-2027, adapted to the challenge of the COVID-19 crisis, and relying on:
- A genuine rethinking of cohesion policy: Cohesion policy must help regions, and additional simplification and more flexibility is needed, whilst ensuring the funds are now directed more towards social infrastructures (healthcare in particular).
- A focus on the agreed priorities: the MFF must be fit for the future challenges, such as developing the right mitigation and adaptation strategies in the fight against climate change and the fast digitalisation development of our economy and society.
- New approaches to address the immediate priorities: temporarily lifting the maximum budget cap in the MFF could give the Commission extra capacity to borrow on financial markets to help underwrite spending and investments over the first three years of the MFF.
Additional tools, such as a Recovery Fund, should help the EU in setting up an effective set of measures oriented to future-proof and sustainable investment. This approach is the only way to allow a genuine capacity of sharing the burden of the crisis, via either “Recovery bonds” or “European Health Bonds”, with a clear and defined common objective and subject to jointly-agreed guidelines.
Finally, counter-cyclical investment will be the key element to build resilience and re-instate growth, in consonance with promoting climate neutrality and enhancing social fairness. Investment in research and innovation, as well as in social infrastructure must be a priority. The EU’s ability to boost and coordinate these investments will largely define our competitiveness and leadership in the post-crisis world.
You can consult the full CEEP Paper “The Path to Recovery: a Strong MFF and an Unprecedented Investment Plan” here.