{"id":6917,"date":"2024-03-20T18:26:57","date_gmt":"2024-03-20T18:26:57","guid":{"rendered":"https:\/\/euromenaenergy.com\/?p=6917"},"modified":"2024-03-20T18:26:57","modified_gmt":"2024-03-20T18:26:57","slug":"the-case-for-a-european-public-goods-fund","status":"publish","type":"post","link":"https:\/\/emimer.com\/?p=6917","title":{"rendered":"The Case for a European Public-Goods Fund"},"content":{"rendered":"<div class=\"article__byline\"><time class=\"vl-divider\" datetime=\"2024-03-04T12:10Z\">Mar 4, 2024<\/time><span class=\"byline\"><a class=\"track-event\" href=\"https:\/\/www.project-syndicate.org\/columnist\/age-bakker\" data-entity-type=\"member\" data-entity-id=\"79967c0246f86f2c0fef2b0b\" data-language=\"english\" data-event-action=\"click\" data-entity-link-name=\"age-bakker\" data-href-original=\"\/columnist\/age-bakker\"><span class=\"listing__author author\">AGE BAKKER<\/span><\/a><\/span>,\u00a0<span class=\"byline\"><a class=\"track-event\" title=\"Roel Beetsma\" href=\"https:\/\/www.project-syndicate.org\/columnist\/roel-beetsma\" data-entity-type=\"member\" data-entity-id=\"65e5b79f5f7bc1603c3b2cc4\" data-language=\"english\" data-event-action=\"click\" data-entity-link-name=\"roel-beetsma\" data-href-original=\"\/columnist\/roel-beetsma\"><span class=\"listing__author author\">ROEL BEETSMA<\/span><\/a><\/span>,\u00a0and\u00a0<span class=\"byline\"><a class=\"track-event\" title=\"Marco Buti\" href=\"https:\/\/www.project-syndicate.org\/columnist\/marco-buti\" data-entity-type=\"member\" data-entity-id=\"65ba488f994a6dfa07243c03\" data-language=\"english\" data-event-action=\"click\" data-entity-link-name=\"marco-buti\" data-href-original=\"\/columnist\/marco-buti\"><span class=\"listing__author author\">MARCO BUTI<\/span><\/a><\/span><\/div>\n<div class=\"article__abs u-mt-se\" dir=\"ltr\">\n<p>With the European Union\u2019s pandemic recovery fund set to end in 2026, there is an urgent need for more durable financial mechanisms to support its long-term objectives. Fortunately, a new investment fund could both enhance the EU\u2019s growth potential and ensure compliance with its new fiscal rules and shared values.<\/p>\n<\/div>\n<div class=\"article__body article__body--commentary  english\" dir=\"ltr\" data-page-area=\"article-body\">\n<p data-line-id=\"3b8c9a3fc36b45b8b7aa57ab0f149f2e\">AMSTERDAM \u2013 Following weeks of intense negotiations, the European Union has\u00a0<a href=\"https:\/\/www.reuters.com\/markets\/europe\/eu-agrees-looser-fiscal-rules-cut-debt-boost-investments-2024-02-10\/\" target=\"_blank\" rel=\"noopener noreferrer\">agreed<\/a>\u00a0to revise its fiscal rules. The new rulebook will replace the Stability and Growth Pact (SGP) \u2013 which has been suspended since the start of the COVID-19 pandemic \u2013 and modernize the bloc\u2019s 25-year-old fiscal framework.<\/p>\n<p data-line-id=\"3c76e0665b0e4e8b95f568b38e0b86be\">While the SGP featured a one-size-fits-all model that ultimately undermined its credibility, the updated fiscal rules allow for a differentiated approach. The goal is to maintain the existing deficit and public debt limits while still encouraging member states to invest in green and digital technologies. Member states will be granted extended adjustment periods of up to seven years to reduce their debts to sustainable levels, provided they commit to reforms and investments that support this double (green\/digital) transition.<button class=\"comment__caller icon-box icon-box--v \" aria-expanded=\"false\" aria-label=\"Paragraph comment\" aria-controls=\"login_register\" aria-haspopup=\"true\"><\/button><\/p>\n<p data-line-id=\"fc10af4f73f2459dbf62d5588b11b52d\">But while the EU\u2019s efforts to strike a balance between fiscal discipline and growth incentives are commendable, national budgets alone will not be enough to finance the EU\u2019s ambitious double transition. The European Commission estimates that an annual investment of roughly \u20ac650 billion ($700 billion) is needed to meet the\u00a0<a href=\"https:\/\/ec.europa.eu\/commission\/presscorner\/detail\/en\/ip_22_1467\" target=\"_blank\" rel=\"noopener noreferrer\">2030 targets<\/a>\u00a0of producing at least\u00a0<a href=\"https:\/\/energy.ec.europa.eu\/topics\/renewable-energy\/renewable-energy-directive-targets-and-rules\/renewable-energy-targets_en#:~:text=The%20revised%20Renewable%20Energy%20Directive%20EU%2F2023%2F2413%20raises%20the,renewable%20energy%20in%20the%20EU.\" target=\"_blank\" rel=\"noopener noreferrer\">42.5%<\/a>\u00a0of the bloc\u2019s energy from renewable sources and reducing greenhouse-gas emissions by 55%.<button class=\"comment__caller icon-box icon-box--v \" aria-expanded=\"false\" aria-label=\"Paragraph comment\" aria-controls=\"login_register\" aria-haspopup=\"true\"><\/button><\/p>\n<p data-line-id=\"99d85465f0d844ff878dee0fd7d816ed\">Under the new fiscal rules, funding for digital and green investments can be sourced from the \u20ac800 billion\u00a0<a href=\"https:\/\/commission.europa.eu\/strategy-and-policy\/eu-budget\/eu-borrower-investor-relations\/nextgenerationeu_en#:~:text=NextGenerationEU%20is%20the%20EU's%20%E2%82%AC,took%20place%20in%20June%202021.\" target=\"_blank\" rel=\"noopener noreferrer\">NextGenerationEU fund<\/a>, which was established in 2020 to help European economies recover from the COVID-19 shock. But since the NGEU is scheduled to end in 2026, there is an urgent need for more durable financial mechanisms to support the EU\u2019s long-term objectives.<\/p>\n<p data-line-id=\"63d66b56bcd747b3a05a1df0d314acc6\">As matters stand, the NGEU\u2019s focus on national investments has left transnational projects such as high-speed railways and hydrogen infrastructure severely underfunded. Moreover, the US Inflation Reduction Act has widened the investment gap between Europe and the United States. To restore its strategic autonomy, European leaders should build on the success of the NGEU.<button class=\"comment__caller icon-box icon-box--v \" aria-expanded=\"false\" aria-label=\"Paragraph comment\" aria-controls=\"login_register\" aria-haspopup=\"true\"><\/button><\/p>\n<p data-line-id=\"ce189922894a46f3b9e93fb0310add1d\">In a forthcoming paper, we propose the establishment of a $750 billion EU public-goods fund aimed at bridging funding gaps in crucial areas like renewable energy and digital infrastructure. The primary focus of this fund would be to catalyze cross-border investments and support projects that struggle to secure funding without EU-level financial support. By making access to this fund contingent on compliance with the new fiscal rules, the EU could maintain fiscal discipline among member states.<\/p>\n<p data-line-id=\"c5951e16031d4ff1befca35efa74be79\">The public-goods fund, which would cover the 2026-30 period, is intended to align seamlessly with the EU\u2019s climate goals. Building on the successful precedents established by previous EU borrowing initiatives, it would be financed by issuing EU bonds, backed by pooled national guarantees, the EU\u2019s budget (bolstered by sufficient revenue streams), or both. Its proposed size represents roughly one-fifth of the bloc\u2019s total investment needs through 2030, and the remaining investments would be financed through contributions from member states and the private sector.<button class=\"comment__caller icon-box icon-box--v \" aria-expanded=\"false\" aria-label=\"Paragraph comment\" aria-controls=\"login_register\" aria-haspopup=\"true\"><\/button><\/p>\n<p data-line-id=\"6e17b0275a2a4ce597248ec823461a49\">By focusing on cross-border investments, the fund would underscore the EU\u2019s unified approach to tackling European challenges. At the same time, the requirement to comply with the new fiscal rules would broaden the conditional framework established by the NGEU program, which linked fund access to the rule of law in recipient countries.<button class=\"comment__caller icon-box icon-box--v \" aria-expanded=\"false\" aria-label=\"Paragraph comment\" aria-controls=\"login_register\" aria-haspopup=\"true\"><\/button><\/p>\n<p data-line-id=\"48de330baada49e29c2ca484cef59446\">Similarly, the proposed conditionality regime would tie access to the new fund to domestic fiscal discipline, thus aligning with the EU\u2019s revised fiscal guidelines. Rather than facing penalties for non-compliance, as was the case under the previous SGP, countries would be incentivized to demonstrate fiscal responsibility.<button class=\"comment__caller icon-box icon-box--v \" aria-expanded=\"false\" aria-label=\"Paragraph comment\" aria-controls=\"login_register\" aria-haspopup=\"true\"><\/button><\/p>\n<p data-line-id=\"ed6a6121c7104cdeb778d144832c3550\">Thus, the conditionality regime would simultaneously boost the EU\u2019s growth potential, uphold the integrity of the new fiscal rulebook, and encourage fiscal sustainability among member states. Moreover, increased debt issuance at the European level could be offset by reduced debt issuance at the national level.<button class=\"comment__caller icon-box icon-box--v \" aria-expanded=\"false\" aria-label=\"Paragraph comment\" aria-controls=\"login_register\" aria-haspopup=\"true\"><\/button><\/p>\n<p data-line-id=\"600aff490d774c10a1504a9d0bc95ca8\">Once the fund is established, countries would be encouraged to submit comprehensive investment proposals for transnational projects. The European Investment Bank would determine whether they are eligible to access the fund\u2019s resources based on their alignment with the EU\u2019s double-transition targets and the potential for positive cross-border spillovers. Meanwhile, the European Commission would ascertain that the countries proposing these projects comply with fiscal rules.<button class=\"comment__caller icon-box icon-box--v \" aria-expanded=\"false\" aria-label=\"Paragraph comment\" aria-controls=\"login_register\" aria-haspopup=\"true\"><\/button><\/p>\n<p data-line-id=\"7182cdfddf4940949ef241e880afefe7\">The fund\u2019s proposed design aligns with the trend of using EU funds to achieve broader policy objectives. By relying on the successful model of the pandemic recovery fund and the bloc\u2019s current conditionality regime, it would empower the EU to meet crucial climate targets while upholding its shared values.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Mar 4, 2024AGE BAKKER,\u00a0ROEL BEETSMA,\u00a0and\u00a0MARCO BUTI With the European Union\u2019s pandemic recovery fund set to end in 2026, there is an urgent need for more durable financial mechanisms to support its long-term&#8230;<\/p>\n","protected":false},"author":1,"featured_media":6920,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14,17],"tags":[40,46,48,50,57,68,76,77,78,79,80,82,86,87,88,90,95,96,98,99,103,107,109,111,112,114,121,123,137,139,146,148,153,159,174,176,181,182,184,187,196,201,202,203,209,217,221,222,229,231,232,233,239,241,244,246,249,250,251,252,256,262,263,266,268,277,279,280,283,285,288,300],"class_list":["post-6917","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-finance","tag-alleviation","tag-aramco","tag-athens","tag-athensenergydialogues","tag-baroudi","tag-carbon","tag-climate","tag-climate-change","tag-climateaction","tag-climatechange","tag-closure-of-nuclear","tag-co2","tag-cyprus","tag-decarbonising","tag-decarbonization","tag-democracy","tag-disputes","tag-doha","tag-east","tag-eastmed","tag-egypt","tag-embargo","tag-emissions","tag-energy","tag-energy-market","tag-energyindustry","tag-europe","tag-european-fuels","tag-gas","tag-gazprom","tag-greece","tag-greenenergy","tag-hydrocarbons","tag-international","tag-lebanon","tag-liquefied-natural-gas","tag-maritime","tag-maritime-boundaries","tag-maritime-disputes","tag-mediterranean","tag-natural-gas","tag-offshore","tag-oil","tag-oil-and-gas","tag-opec","tag-peace","tag-plants","tag-pollution","tag-poverty","tag-power","tag-putin","tag-qatar","tag-renewable-energy","tag-reserves","tag-rosneft","tag-roudi","tag-russia","tag-russia-in-the-european-energy-sector","tag-russian-gas","tag-russian-sanctions","tag-saudi","tag-solar","tag-solar-power","tag-straddling","tag-sustainability","tag-total","tag-trump","tag-turkey","tag-ukrain","tag-unclos","tag-usa","tag-300"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/6917","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6917"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/6917\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/6920"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6917"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6917"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6917"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}