BRUSSELS BEHIND THE SCENES
Weekly analysis and untold stories
With SAM MORGAN
Occam's EU fund
Problems cannot always be solved by throwing money at them. But the EU finds itself in a position where that maxim is simply not true.
Infamous American satirist H. L. Mencken is attributed with the endlessly applicable quote that “for every complex problem there is an answer that is simple, neat and wrong.”
Russia’s brutal, barbaric invasion of Ukraine and the geopolitical headaches tied to it certainly count as a complex problem. As a complement, there is a surplus of simple yet wrong solutions floating about.
BRUSSELS BEHIND THE SCENES is a weekly newsletter which brings the untold stories about the characters driving the policies affecting our lives. Analysis not found anywhere else, The Brussels Times’ Sam Morgan helps you make sense of what is happening in Brussels. If you want to receive Brussels behind the scenes straight to your inbox every week, subscribe to the newsletter here.
Consensus suggests that a NATO no-fly zone over Ukraine is one such simple, wrong answer, as it would likely involve shooting down Russian warplanes, risking escalation and increasing the likelihood of a nuclear response from the Kremlin.
Nixing overnight all trade in Russian oil and gas is, unfortunately, another wrong answer. Yes, it would cut off Moscow from essential revenue and bring its already-stuttering military machine to a grinding halt.
But EU countries are far too dependent on those fossil fuels and voters are ill-prepared to endure the immediate hardship such a move would trigger. Would it have been easier if the pandemic had never struck? Perhaps.
If there were no elections this year then maybe prime ministers and presidents would be in a position to turn off the gas taps. But there are. While the likes of Viktor Orban might be the most vocally opposed, there are plenty of other leaders that will not even consider it.
That is why at this week’s summit leaders warmed up to the idea of quitting Russian hydrocarbons by 2027. The European Commission is now going to work on the finer details of how to actually do it.
Another easy answer is slowly emerging from the EU ether and – unlike the last two examples – is arguably the right solution to the problem. Once you strip away all the jargon and technicalities, it is also rather simple.
Nearly two years ago, EU leaders agreed to a joint-borrowing exercise, where the triple-A rated Commission would go to the capital markets and raise an €800 billion warchest to spend on recovering from the pandemic.
What was previously unthinkable has become reality. It is on the cusp of becoming EU standard operating procedure, because it is a solution to so many of the bloc’s growing list of existential problems.
At this summit in Versailles, leaders discussed everything Ukraine, including what the best response to the crisis should be. In the lead-up to the meeting, the idea of repeating the ‘Next Gen EU’ borrowing plan was widely talked about.
Some member states still need to be convinced, as they only agreed to the first round of loans and grants because they were assured it was a one-time deal. Others feel that there is enough money already on the table.
More and more governments are siding with the likes of France though, who want to go to the capital markets again and spend their way out of the crisis. It will take time to get an agreement but the chances are getting more and more likely.
Getting the money is one thing, spending it well is another. The EU institutions will have their work cut out making sure member states invest their money shrewdly and also linking the translucent world of EU policy-making with the real world.
That is a seemingly never-ending quest but a worthy one.
Macronisation
Either France is becoming more like the EU or – far more likely – the EU is becoming more like France, because this idea of a recovery fund 2.0 or ‘Deputinisation’ fund (to paraphrase former Council president Donald Tusk) has a distinctly French feel to it.
Before Putin’s posturing turned into invasion and war crimes, a repeat of the funding exercise was mooted as a potential solution to the bloc’s climate policy challenges. Even more money for renewables, renovations and grid upgrades was the logic.
But this new line of thinking goes beyond energy and might include defence spending too. An easy sell given the current situation and something that Paris has wanted for quite some time.
France’s arms and aerospace industries include 5,000+ companies and maintain nearly half a million jobs. A quarter of Europe’s capabilities are accounted for by France alone, so extra cash is simply good strategising by Macron and his allies.
Whether EU leaders will agree to another round of funding is one question, whether they will agree to include defence spending on the list of eligible purchases and investments is another.
Austria, Denmark, Finland, Ireland and Sweden – whose foreign and defence policies are all a different shade of grey to the EU’s as a whole – need to be part of the decision-making process after all.
Another area in which the EU might become more French is energy and specifically, nuclear energy. Macron announced billions in investment for his country’s flagship industry before the Ukraine invasion and other member states are thinking big about power independence.
Whether something close to a disaster at the old Chernobyl nuclear plant or even at the still-functioning Zaporizhzhia facility would sour that ‘atomic renaissance’ is a question for another day. Hopefully one that won’t have to be answered.
More summits are on the way and more talks about joint-debt will definitely be organised. Preparatory work is already underway, so the real question now is: how much will the EU actually borrow?
BRUSSELS BEHIND THE SCENES is a weekly newsletter which brings the untold stories about the characters driving the policies affecting our lives. Analysis not found anywhere else, The Brussels Times’ Sam Morgan helps you make sense of what is happening in Brussels. If you want to receive Brussels behind the scenes straight to your inbox every week, subscribe to the newsletter here.
