The European Commissioner for Economy spoke at the Hertie School about his vision for a competitive EU, including fiscal reform.
On 30 January 2023, the Jacques Delors Centre held a public event in the Hertie School’s Henrik Enderlein Forum, where Commissioner Paolo Gentiloni discussed the economic and political challenges facing Europe, in particular since the Russian invasion of Ukraine almost one year ago.
Christine Reh, Professor of European Politics, opened the evening and Johannes Lindner, Co-Director of the Jacques Delors Centre, moderated the discussion.
As Gentiloni outlined, high energy prices, the industrial policies of other countries as well as access to critical raw materials and technologies posed a challenge to Europe’s competitiveness. “We cannot outsource our energy needs to Russia. We cannot outsource our security to the US. And we cannot outsource our industry to China,” Gentiloni said.
Security and strategic autonomy
While acknowledging the numerous issues ahead, the commissioner also noted some achievements over the last years, such as decoupling from Russia and recovering from a pandemic, which “were possible because we acted with unity, ambition and solidarity.”
The commissioner also emphasised that Europe needed to spend more and, more importantly, “spend better” in terms of common defence. Moreover, the push towards greater European security and autonomy, according to Gentiloni, should be extended to the European economy more largely.
Green transition and industrial policy
Gentiloni pointed out that the European Commission was about to adopt its proposals for a Green Deal Industrial Plan. This would be the Commission’s contribution to the discussion on how to respond to the US Inflation Reduction Act (IRA), which provides a historic boost to America’s green transition but poses challenges for EU industry due to its strong incentives for firms to locate their production in the United States.
“The IRA comes on top of some disadvantages that we have,” Gentiloni said, referring to Europe’s higher energy prices. Industrial policy is needed both at European and national levels, he continued, and for that, EU state aid rules could be adjusted and further financing provided.
Gentiloni pointed to the risk of increasing fragmentation within the EU single market when adjusting state aid rules without financial support. Yet, knowing the reluctance of several EU member states to further common funding, he stressed: “Let’s start from the start and define the targets, the objectives, the needs. And then we will come to the definition of the possible common funding.”
With regards to reforming the EU’s fiscal rules, the commissioner believes they should be adapted to new challenges. “The proposals we put forward in November seek to reconcile the objectives of safeguarding debt sustainability and supporting growth and investments,” he said.
An agreement on this reform would be important to strengthen the Economic and Monetary Union, which furthers European economic integration, Gentiloni added.
While Johannes Lindner called the fiscal reform plans “courageous” for giving the European Commission quite a powerful position to negotiate debt strategies bilaterally, Gentiloni emphasised that strengthening national ownership was a key innovation. He remained optimistic that a fiscal reform agreement would be reached based on the commission’s proposal.
Photos by Thomas Lobenwein
You can watch the full recording of the event here: