{"id":2242,"date":"2024-05-20T17:13:11","date_gmt":"2024-05-20T15:13:11","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=2242"},"modified":"2024-05-27T18:03:45","modified_gmt":"2024-05-27T16:03:45","slug":"the-twin-transitions-in-the-agenda-of-the-new-european-parliament","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2024\/05\/20\/the-twin-transitions-in-the-agenda-of-the-new-european-parliament\/","title":{"rendered":"The \u201cTwin Transitions\u201d in the Agenda of the New European Parliament"},"content":{"rendered":"

The agenda for the new Members of the European Parliament will not only include usual items such as the completion of the single market, but also other priorities. The most important of which being the green transition and energy security that will play a crucial role. This makes the June elections decisive for the future of the Union.<\/span><\/i><\/p>\n

Between June 6 and 9, about 400 million Europeans will be called to elect the members of the new European Parliament, an institution that fundamentally contributes to the democratic nature of the European Union. It is indeed the only supranational legislative assembly in the world elected by universal suffrage. Although it does not exercise legislative initiative power (in the European Treaties, this is normally entrusted to the Commission), the European Parliament is one of the two legislative chambers of the EU institutions, representing its citizens.<\/span><\/p>\n

The tasks of the European Parliament<\/b><\/h3>\n

The European Parliament can approve, amend, or reject proposals from the European Commission, jointly with the EU Council \u2013 the institution representing the governments of the 27 Member States through ministers. Without the favorable vote of the European Parliament, it is not possible to proceed on some fundamental EU decisions, starting with regulations and directives on the so-called \u201cfour fundamental freedoms\u201d of the internal market, i.e., the set of laws that guarantee the free movement of goods, services, people and capital. However, that is not all: the Parliament has in fact veto power and a strong power to influence through its ability to amend the Commission\u2019s proposals on all regulations concerning EU policies, both those where the Union has exclusive competence (competition, trade policy, economic and monetary union, EU budget) and those shared with Member States. Social policy, economic and territorial cohesion, agriculture, environment, consumer protection, trans-European transport and energy networks, cooperation in crime fighting (security and justice), and common safety issues in public health are all areas that directly affect the lives of citizens and are also defined by the political orientation expressed by the European Parliament from time to time.<\/span><\/p>\n

Scenario for 2024-2029<\/b><\/h3>\n

In the new 2024-2029 office term, the agenda of the new Parliament will not only be defined by the objectives set by the EU as an institution but also by a significantly changed international context. The Russian invasion of Ukraine, the assertiveness of Chinese foreign policy and \u201cdynamic\u201d transatlantic relations due to uncertainty about the outcome of the next U.S. presidential elections, mark an international framework that requires the EU to maintain significant negotiating weight to avoid geopolitical irrelevance. Although the European Parliament is not directly involved in the development of common foreign policy, which remains coordinated among Member States at the European Council, it is clear that the negotiating weight the EU will exert in bilateral and multilateral relations will contribute to the choices made on the rules governing what remains the world\u2019s second-largest internal market.<\/span><\/p>\n

Advice from super-consultants<\/strong><\/h3>\n

In the economic agenda of the new Parliament, the first and traditional scope of action is precisely that of the functioning of the European internal market. Allowing and preserving the free movement of goods, services, capital, and people has been a goal since the Treaty of Rome in 1957, to overcome national market fragmentation and create a continental area where businesses and consumers have greater opportunities.\u00a0<\/span><\/p>\n

The construction of the European single market has taken time and reforms to make decision-making processes more efficient and, after more than sixty years, it is not yet complete. Especially in areas like services and capital, the level of market integration is still insufficient. The new Parliament will therefore be called upon to work, with the Council, on the proposals that the Commission will advance on this issue. These proposals may be inspired by the report presented on April 18, 2024 by Enrico Letta, former Italian Prime Minister and now President of the Jacques Delors Institute, which was commissioned by the Council and the Commission to identify actions necessary to complete the single market (see also his interview at p. XXX of in this issue).\u00a0<\/span><\/p>\n

Another item, related to the first, on which the new members of the European Parliament will need to legislate is linked to the more general issue of the Union\u2019s competitiveness. Here too, the EU has appointed a \u201csuper consultant\u201d: Mario Draghi, who, like Letta, has been Italian Prime Minister and was also President of the European Central Bank. Draghi\u2019s report will be presented immediately after the June elections, but some analysis and proposals have already been anticipated in various public events and interviews.<\/span><\/p>\n

What\u2019s included in the Green Deal Legislative Package<\/b><\/p>\n

\"\"<\/p>\n

From digital transition to green transition<\/b><\/h3>\n

One of the main factors affecting competitiveness is productivity, both in terms of the workforce\u2019s ability to generate greater added value per hour worked and overall system efficiency.\u00a0<\/span><\/p>\n

For several years, and particularly since the 2008-2012 financial and debt crisis, the EU has seen slower productivity growth compared to the United States, traditionally used as a benchmark. The lackluster performance can be partly explained by the EU\u2019s delay in disseminating and using digital technologies, starting with the development of artificial intelligence. All these issues require appropriate regulation, as well as an economic system capable of providing resources for the necessary investments, through better integration of capital markets. It is therefore likely that the digital transition will continue to be one of the central items of the economic agenda of the new Parliament, especially in terms of competitiveness.\u00a0<\/span><\/p>\n

Another fundamental area of innovation and efficiency recovery is represented by the green transition. The European Green Deal, launched in 2020, provides for the decarbonization of most economic sectors to achieve carbon neutrality by 2050, with an intermediate goal by 2030 of reducing emissions by 55% compared to the 1990 value (the so-called \u201cFit for 55\u201d). To achieve this goal, the Commission has launched a comprehensive legislative program that affects various sectors, including energy, industry, agriculture, transport, and construction (Figure 1).<\/span><\/p>\n

With the Russian invasion of Ukraine, the Green Deal has also taken on a geopolitical dimension: the acceleration in renewable production, already planned, has become a key pillar to ensure energy security in the EU. For this reason, the Union has set an intermediate target by 2030: to reach 42.5% from renewable sources (from the current 23%), reducing energy costs and dependence on third countries such as Russia. Plus, from 2035 we will only be able to buy zero CO2 emission cars, while by 2030 all new buildings should be zero emissions and by 2050 all EU real estate should have zero emissions, which is why in several European countries building renovations are subsidized for energy improvement purposes.\u00a0<\/span><\/p>\n

The legislative package contains other rules, proposed by the Commission, but not yet approved: the new Parliament, together with the Council, will also have to legislate on these. They include, for example, corporate responsibility for sustainability throughout their entire production chain, including from extra-EU suppliers; the introduction of emission regulations for the maritime and aviation sectors; the reform of the European electricity market; and the construction of a better interconnected continental energy network.<\/span><\/p>\n

How to finance the \u201cTwin Transitions\u201d<\/b><\/h3>\n

In defining its agenda, the new European Parliament will have to focus on the quality of the rules, in terms of consumption and the investment needed to ensure carbon neutrality by 2050. On the one hand, rules must avoid excessive burdens for consumers and businesses. The green transition requires specific skills and raw materials, which might be available in limited quantities or at high costs. It will therefore be crucial to establish adequate timing for the implementation of the Green Deal legislative package, avoiding legislative overload. On the other hand, rules will play a fundamental role in stimulating the financing of the transitions, by modifying the investment decisions of consumers and businesses.\u00a0<\/span><\/p>\n

The Commission\u2019s estimates report that the \u201ctwin\u201d transitions \u2013 environmental and digital ones \u2013 imply total investments of about 500 billion euros a year, at least until 2030. It seems a huge figure, but it is not beyond the reach of the European economy. Since the post-pandemic recovery, the euro area as a whole has generated a gross fixed capital accumulation of about 625 billion euros per quarter. Translated, this means that to reach the goal it would be sufficient to direct about 20% of total European investment each year to the environmental and digital transitions, which is not an unrealistic figure if it falls within a general direction of industrial policy that guides business investments. Clearly rules, by defining where it will be preferable to invest and where not, will play a key role in this area.\u00a0<\/span><\/p>\n

Of the 500 billion euro per year needed for the two transitions, part will need to be public, because investments in environmental goods do not always guarantee the returns required by private individuals. Even here the accounting is not so discouraging. Assuming that public investment amounts to 150 billion euro per year (about 30% of the total), it would be around 6% of the annual public expenditure of the euro area governments. Here too, rules play a fundamental role, since with the definition of the major economic policy guidelines (the so-called \u201cBroad Economic Policy Guidelines\u201d defined by Article 121 of the Treaty), the EU institutions can influence national public spending so that states ensure that at least 6% goes into environmental and digital subsidies or investments. A further level of spending, will probably be necessary to balance the accounts, because in addition to the traditional \u201cmarket failure\u201d that justifies national public spending to complement private spending, in Europe there is the lack of coordination of national spending aimed at creating European public goods, i.e., the economic argument at the basis of the structural action of the community budget in research and development and in the large continental transport infrastructures. Again, for the peace of mind of national governments, we can imagine a level of federal spending equal to about a third of the overall public spending, that is 50 billion euros: it represents 0.3% of the euro area\u2019s GDP and is well within the additional guarantees that member states have provided to the community budget to finance Next Generation EU.\u00a0<\/span><\/p>\n

In summary, for the transition of the European growth model to the new global geopolitical context, it would be sufficient for the next few years to allocate to the environmental and digital transition 15% of the existing private investments, 4% of national public spending, and 0.3% of the GDP in the community budget. And except for the European budget, presumably, what is required is not additional funding, but simply redirecting what is already planned through proper rules. This will be one of the fundamental tasks of the new European Parliament. The forecasts for the June vote made by the European Council on Foreign Relations indicate that right-wing populist parties will gain seats at the expense of center-left and green parties. However, the coalition between popular, socialist and liberal parties that in the outgoing Parliament has guaranteed support for the Green Deal should continue to have a sufficient majority in the new legislative chamber. It will be important to ensure that the inevitable political compromises that must be reached in the new Parliament do not call into question the fundamental direction of the legislative agenda for the next five years.<\/span><\/p>\n

Carlo Altomonte<\/strong> is a Professor of European Integration Economics at Bocconi University and a board member at the Institute of European Policy Making.<\/span><\/em><\/p>\n

Stefano Riela<\/strong> is an Academic Fellow at Bocconi University and a Senior Associate Research Fellow at ISPI.<\/span><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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