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Charting The Course For The Next EU Budget
The EU debates a larger, strategically focused budget for 2024-2034, prioritizing defense, digitization, and Ukraine support.
As the European Union approaches its summit on February 1, 2024, policymakers are engrossed in the midterm review of the current EU budget, spanning 2021 to 2027. With an eye on the future, it is crucial for political leaders to shift their focus to the next budget, even though its implementation is years away.
The Urgency Of Strategic Financial Planning
Typically, EU budget proposals, which involve extensive negotiations over fractions of the gross domestic product, are drawn up years in advance. However, the pandemic illustrated the importance of strategic thinking, exemplified by the creation of the Recovery and Resilience Facility (RRF), a budget nearly as large as the regular EU budget. The next multiyear budget, expected to extend up to 2034, must be considerably larger to meet emerging strategic imperatives, including support for Ukraine's membership and the economic challenges of decarbonization and digitization.
What is the purpose of the RRF?
The RRF primarily aims to support EU member states in their post-pandemic economic recovery and enhance their resilience to future crises.
How is the funding from the RRF allocated among EU countries?
The allocation is based on a combination of factors, including economic challenges, green and digital transition needs, and population size.
What is an example of how RRF funds might be used?
RRF funds could be invested in projects such as upgrading digital infrastructure, boosting green energy initiatives, and improving healthcare systems.
What role does the European Commission play in overseeing RRF investments?
The European Commission monitors and evaluates the implementation of RRF plans to ensure they align with EU objectives and deliver the intended economic and resilience benefits.
Balancing Investment Needs With Market Protection
The budget must address significant investment needs, particularly in decarbonizing and digitizing the European economy and enhancing regional defense capabilities. Relying solely on national budgets for these investments could lead to disparities among member states, potentially disrupting the single market's level playing field. Northern European countries will need to reconcile their frugal approach with the need to protect the single market and address common defense concerns amid ongoing regional conflicts.
Shifting Budget Priorities And Innovative Funding Approaches
The composition of the next EU budget must evolve, shifting from traditional solidarity-focused transfers to addressing pan-European challenges like defense and infrastructure development. This shift may include exploring new funding methods, such as common procurement, RRF-style allocations, and maintaining common debt issued for the RRF rather than repaying it. These changes signal a move towards prioritizing pan-European public goods over traditional redistributive measures.
The Path To A Grand Bargain
A potential grand bargain between net contributors and recipients of the EU budget could see a substantial increase in budget size, but with a focus on new priorities. This approach would require consensus on a comprehensive package, balancing the interests of different member states. With EU voters heading to the polls in five months, the time is ripe to engage citizens in this crucial budget debate and navigate the complexities of democratic statecraft.
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