Memos to the new EU leadership | 2019 - 2024

Braver, greener, fairer: Memos to the new EU leadership | 2019 - 2024

Edited by Maria Demertzis and Guntram Wolff.

The policymakers who will lead the European Union until 2024 take office in the context of a more favourable economic environment than their predecessors faced. Growth is steady, employment is up and investment is recovering. But in other ways, the new leadership confronts formidable challenges. The multilateral consensus is breaking down and a geopolitical confrontation between the United States and China has become a reality. Global warming has not been tackled and the world’s emissions continue to rise. Digital technologies are challenging traditional notions of society and work.

Europe must be brave in facing up to the new circumstances. It must aim at a green transformation of the economy. And it must ensure social fairness so the costs of change do not fall on the weakest. This set of 16 memos assesses the state of affairs and the main challenges for the incoming commissioners and presidents, and provides them with concrete policy recommendations.

 

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Bruegel’s set of 16 memos is addressing the main challenges for the incoming commissioners and presidents.Below the list of individual memos and the audio versions

Memo to the presidents of the European Commission, Council and Parliament

By Maria Demertzis, André Sapir and Guntram Wolff

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  • You inherit a relatively healthy European economy, but you face three formidable challenges in the next five years. First, you must define Europe’s place in an increasingly bipolar world driven by a geostrategic rivalry between the United States and China.

    You should avoid protectionism and instead strengthen Europe’s technological, financial and security capacities. You should continue to support multilateral institutions and stand ready to retaliate against trade aggression. Second, global warming is a reality and temperatures appear to be rising faster than forecast. You need to impose higher prices on greenhouse-gas emissions, guide a deep transformation of our economies, minimise the resulting social fallout, ensure border carbon adjustment and globalise the EU’s decarbonisation. Third, you need to manage the economy and EU cohesion. The main worry is a deep recession or even a new crisis. Guide European policymakers on the use of pro-active fiscal policy, reform the governance of the euro area and address tax fraud and evasion.

Memo to the president of the European Central Bank

By Grégory Claeys, Maria Demertzis and Francesco Papadia

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  • Monetary policy must reinvent itself in the wake of the crisis. Reinvention is particularly important because the system is riddled with uncertainties and the scope for applying both conventional and unconventional instruments is limited. The architecture of Economic and Monetary Union makes the challenge even greater because alignment of preferences and policies can only go so far. The European Central Bank will have to be clearer on what it can do, while remaining flexible in order to manage current uncertainties and unknowns. While the ECB’s main objective is price stability, it will also have to contribute to the identification of, and response to, financial imbalances, while preserving its independence.

Memo to the High Representative of the Union for Foreign Affairs and Security Policy

By Jean Pisani-Ferry and Guntram Wolff

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  • Economics used to play a limited role in foreign policy, which was about wars, conflicts and human disasters – and how to avoid them. But neither China nor the United States now separates economics from geopolitics. The competition between them is simultaneously an economic competition and a security competition. This is a threat to the multilateral system the European Union has relied on for nearly seven decades and to the EU’s separation of external economic relationships from geopolitics. You and your Commission colleagues must redefine for the EU its concept of economic sovereignty and the instruments it needs to defend and promote it.

Memo to the commissioner responsible for Better regulation

By J. Scott Marcus, Catarina Midões and Adriaan Schout

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  • In the face of substantial Euroscepticism, diverging approaches to policy among EU countries and concerns over burdensome legislation, protecting the credibility of EU policy formulation is of vital importance. Better regulation tools and processes are a vital part of this. Transparency, objectivity and independence are key.

    Though the better regulation process overall is an area of strength for the EU, you should make impact assessments more consistent and work to improve the quality and consistency of economic analysis. You should also give greater weight to the ex-post evaluation process and connect it better to the ex-ante impact assessment process.

    In addition, you should push for more resources for regulatory scrutiny and prioritise communication to demonstrate that EU policy has a sound basis and delivers real benefits.

Memo to the commissioner responsible for Budget

  • You take over responsibility for the EU budget at a difficult time. Budget discussions have deepened divisions between member states over agriculture, cohesion, better spending, innovation and new priorities. Views on the desired size of the budget also diverge, while Brexit (if it happens) will leave a hole in the budget. Rule-of-law issues in some countries complicate matters.

    You will need to address a number of issues including the shares of spending on different objectives, the revenue side of the budget and accounting practices. You should also promote the idea of a cyclical stabilisation instrument for the euro area, such as a common unemployment benefit scheme. And when a calmer period arrives after the EU budget is approved, you should initiate a fundamental rethink for the post-2027 period.

Memo to the commissioner responsible for Economic affairs

By Zsolt Darvas, Thomas Wieser, Stavros Zenios

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  • The good news is that the economic situation has considerably improved compared to the first half of this decade. New jobs are being created in every member state. But there are signs the upswing is slowing and the growth potential is weak. In this context, the need for structural reforms remains pressing. Major questions also remain over the euro-area architecture.

    You should reinforce the European Semester, including by focusing more on climate policies, and push countries to reduce their debts. As part of this, you should establish a European Fiscal Council. More broadly, the low-interest-rate environment creates the opportunity for a richer discussion on fiscal policy.

    Meanwhile, progress is needed on deepening the euro area. You should aim to influence the discussion, in particular on completing the banking union and the development of sovereign contingent debt and a euro-area safe asset.

Memo to the commissioner responsible for Taxation and Custom Unions

By Agnès Bénassy-Quéré, with assistance from Konstantinos Efstathiou

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  • Taxation policy is largely reserved to member states, but the European Union should nevertheless do more to address the concerns of its citizens and combat tax avoidance, evasion and fraud.

    You should also take measures to sustain tax revenues to fund social protection and to plug flows to non-EU tax havens. You should speed up the introduction of a new system to combat VAT fraud, work to tackle profit shifting and address taxation of the digital economy.

    In addition, energy taxes are ripe for revision to underpin the low-carbon transition, and you should engage fully in the discussion on tax fairness.

    None of this implies harmonisation of tax rates; in fact variation in tax rates in different EU countries can be desirable to enable countries to address their specific circumstances and needs.

    Tax policy should increasingly be designed in relation with general EU objectives such as fair competition, energy transition or social justice.

Memo to the commissioner responsible for Financial services

  • Among the many challenges you face, the most pressing is the unfinished banking union. This perpetuates a major fragility of the euro area that still threatens its survival in case of future crises, and undermines the efficiency of financial intermediation and the international role of the euro.

    Completing the banking union is thus what will define your term’s overall success or failure. This highly complex project encompasses banks’ concentrated sovereign exposures, European deposit insurance, other aspects of the policy regime for non-viable banks (including the resolution/insolvency framework and aspects of state aid control), and phasing out barriers to cross-border integration.

    You should also promote EU-wide integration of capital markets infrastructure, step up the fight against money laundering and reaffirm the EU commitment to global financial standards.

Memo to the commissioner responsible for Investment

By Grégory Claeys and Alexander Lehmann

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  • You take office at a time of strengthening aggregate investment, and corporate investment in particular. Nevertheless, you face major challenges to foster strategic investment that will raise productivity and develop a carbon-neutral economy. Among your tasks will be addressing the shortcomings of policies you inherit: the Investment Plan for Europe and the Capital Markets Union (CMU).

    The successor to the Investment Plan for Europe will be InvestEU. You should make further improvements, in particular by reinforcing the additionality criteria

    in the choice of projects that can benefit from the EU guarantee. On CMU, you should push and persuade national regulators and encourage cross-border integration, while emphasising equity finance for smaller companies and companies in periphery and cohesion states.

    Your overarching goal should be to develop a financial ecosystem of diverse and cross-border funding sources, in which investment funding is less vulnerable to banking crises.

Memo to the commissioner responsible for Climate action and energy

By Simone Tagliapietra and Georg Zachmann 

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  • To decarbonise in line with the Paris Agreement, you will have to unleash a deep energy transformation in Europe. Policy choices made up to 2024 will define the shape of the EU energy system in 2050.

    Fortunately, most of the necessary technologies are now available at declining costs and an increasing share of the population understands that Europe stands to gain from such a transformation in the long-term

    You should fight for a price on all greenhouse gases in the EU and offer policies that enable all technology options to play to their full strengths in the decarbonisation process. Crucially, you must face up to the distributional effects of climate policies. Unless the distributional consequences of climate policies are addressed, there is a risk of a social backlash against decarbonisation.

Memo to the commissioner responsible for Trade

By Alicia García Herrero and André Sapir

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  • You face three big challenges. Probably the most important is preserving the multilateral trading system, including by reforming the World Trade Organisation. Second, you must build stronger bilateral trade relations with key partners, such as the US, China and the United Kingdom. Third, you need to deal with issues such as e-commerce and climate change.

    You should make contingency plans in case the WTO becomes dysfunctional or even ceases to exist. Meanwhile, you should pursue strong bilateral trade relationships with the hope that they can form the basis for a reformed WTO. Post-Brexit negotiations with the UK should also top your agenda.

    The increasing role of services, investment and e-commerce will also require much of your attention, and you will have to reflect on trade and the goals of the Paris Agreement.

Memo to the commissioner responsible for Competition

  • Market regulation is increasingly political and, for good or ill, competition intervention is seen as offering solutions to deeper socio-political challenges. You will face the challenge of the growing overlap between competition and trade policy. Nevertheless, your commitment should be to your core responsibilities: promoting the competitive process and guarding against anti-competitive practices, in order to maximise economic efficiency. You must continue to demonstrate that protectionist rule changes will undermine EU competitiveness in the medium- to long-term.

    Your overarching task is to maintain the independence of competition enforcement and to ensure the efficient allocation of resources, applying sound economic theory to provable facts. Competition policy also needs to increase its flexibility to address the challenges posed by digital markets. On the international stage, you must more forcefully advocate a uniform understanding of the dynamic goals of competition regimes.

Memo to the commissioner responsible for Digital services, content and networks

  • Digitalisation will be at the core of maintaining Europe’s economic sovereignty, supporting the EU’s climate strategy and ensuring economic growth, employment and competitiveness. Relevant and fast-moving developments include artificial intelligence (AI), the data economy and robotics – areas in which the EU has weaknesses.

    Key measures you should take include pushing for public funding for AI and robotics, and promoting private funding for digital start-ups and scale-ups. You should also examine how digital technologies can help the EU reach its climate and environment goals, for example through new approaches to transport.

    Because digital is everywhere, you will need to work closely with your colleagues, including the commissioners responsible for climate, energy, employment, transport and industry.

Memo to the commissioner responsible for Single market and industrial policy

By Carlo Altomonte and Reinhilde Veugelers 

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  • A well-functioning single market with enforced competition rules has traditionally been considered the best industrial policy the EU could choose. But global developments, related especially to the emergence of big digital technology firms from China and the United States, have left European companies behind.

    You will need to tackle the horizontal challenge of reinforcing single market policy areas, especially for services and public procurement, while taking on the vertical challenge of identifying key targets on which to concentrate, being careful to avoid picking losers.  In choosing targets for support, it is better to support many initial endeavours, addressing the difficulties of emerging networks. You should also work to coordinate national industrial development programmes, and regional smart specialisation initiatives.

Memo to the commissioner responsible for Research and Innovation

  • The EU’s science and innovation performance is mixed. Overall spending on science is still behind EU targets, with business R&D a particular contributor to the lag. However, the EU has caught up with the US in scientific quality terms.

    Your main focus will be Horizon Europe funding. You should aim to make it as effective as possible in supporting socially and environmentally sustainable EU growth, including by addressing major challenges, including climate change.

    You should ensure good mixes in Horizon Europe of top-down and bottom-up instruments, and of upstream science, pre-commercial research and downstream innovation. You should build on the success of the European Research Council and ensure the EU offers a high level of researcher mobility and is open to talent from around the world.

Memo to the commissioner responsible for Enlargement and neighbourhood

By Marek Dabrowski and Georg Zachmann 

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  • Preparations for accession in the formal and potential EU candidates have slowed down as a consequence of slow progress in institutional and economic reform, unresolved regional conflicts and limited appetite for further enlargement among EU member states. Meanwhile, in the last five years, the security situation in the EU’s immediate neighbourhood has deteriorated markedly. In terms of enlargement, you should maintain potential EU accession as a credible and attractive option for candidates and potential candidates, while finding models of cooperation with adjoining countries that do not include the prospect of membership. European Neighbourhood Policy needs a profound revamp to enable institutionalised cooperation in mutually beneficial areas, which will be open to each country that fulfils the specific criteria and whose strategic interests do not undermine the EU.