Green Deal: The long battles lying ahead

From September, we should expect intense battles between EU institutions, business groups and civil society that will be sharpened by the COVID-19 crisis whose consequences are incalculable, writes Daniel Guéguen.

While the Single Market of 1992 was based on the notion of scale, the Green Deal is based on a change of paradigm. It represents a hugely ambitious project that, even before COVID-19, was being frustrated by a European Council reluctant to provide the Commission with the necessary funds.

The COVID-19 crisis has moved the European Union into unknown territory, full of danger. The risks are such that every economist, political scientist and forecaster is now wondering about the sustainability of the European Union and the Euro.

First, the EU’s €1,000 billion budget for the 2021-27 period, also known as the multiannual financial framework (MFF). With COVID-19, the figure has to be multiplied by 10. In effect, a total of +/- 10,000 billion (i.e 75% of the annual EU-27 GDP) could be needed in 2020-2022 to absorb the shock and relaunch the economy. This massive sum will be financed by the MFF, Transition Fund, Green Deal Investment Plan, European Stability Mechanism, European Central Bank and national plans.

Who is going to pay? The EU will be divided between reluctant countries and assisted countries. The reluctants include Germany, the new “League” (Ireland, Netherlands, Denmark, Sweden, Baltic states, …) and the Visegrad group. Among the assisted, there are Italy and Spain for sure, but no doubt France too. The Franco-German competitiveness gap will become huge, with Germany reinforcing its economic leadership, and France in agony.

Some renowned economists say the euro could either fail or rupture. This scenario is not foreseeable as it is not feasible: how could we live day to day with a currency that no longer exists? Most likely scenario: the euro survives in the medium term, but with the weakest members losing major purchasing power. In other words, countries like Italy, Spain and especially France will get poorer and we should expect large-scale social movements that will endanger the very existence of the EU in its current form.

Battle lines drawn up

A trimester after the beginning of lockdown, three observations can be made:

  • The Commission has proved its ability to work online with the same level of intensity and performance as in normal times (with COVID-19, original schedules have been only slightly affected);

  • The inability of officials and media to gauge the scale of the economic shock. All the assessments are below what the reality will be. For many industries, the priority is simply to survive.

  • The competitiveness gap between European economies, already huge, will grow. Germany is expecting a return to the pre-COVID situation from the first trimester of 2021, but assisted countries do not foresee this before 2023, even 2024-25.

It is clear that the Green Deal underpins a change of paradigm with the objective of qualitative improvement, a sort of “new European way of life”. Beyond this ambition, co-operation and time is required, as are technological leaps and significant funding.

At a time when the European House is beginning to burn, is it more urgent to put out the fire or rebuild the house? It is quite easy to guess what will happen in the coming months:

  • The EU Institutions will enter into a long battle marked by a structural alliance between the Commission and Parliament, while a divided European Council will try to dilute the Green Deal and slow down its implementation. This battle will be fierce. The Commission masters all the levers and for once can consider that its Green Deal project enjoys popular support. The European Parliament will be very vocal and hands-on. The Green Deal has the support of a huge majority of MEPs and they will exert all the pressure necessary to make sure it moves forward in line with planning. This fine alliance will be frustrated by a European Council constrained by the economic impact of COVID-19. How can France – a clearly pro-Green Deal country – invest massively in the green economy given its deficit level, debt level and lack of competitiveness ?

  • This same logic of conflict will prevail at stakeholder level, with a civil society eager to change the world (“no more business as usual”) and a business sector focussed on its survival in an economic and social environment deteriorating long term both in the European Union and worldwide. Here too, things will be bad. Already some sectors are saying in private that there is an urgent need to slow down the Green Deal, water it down, even exclude certain industries. This defensive logic will find itself confronted with NGOs that are extremely active and organised, and also supported by public opinion which is poorly disposed towards big business. We may fear that between these two opposing groups, the word “compromise” will be non-existent, resulting in violent clashes.

Instability and conflict are the two words that come to mind when analysing the Green Deal after COVID-19. Institutional balance, member state relations, stakeholder interaction: nothing will be like before. We have to get prepared.

Daniel Guéguen

Article to be found in Euractiv here

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