View from Brussels: International Rescue, EU-style
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Faced with the twin impacts of Russia’s war on Ukraine and the escalating threat of climate breakdown, top EU officials are now getting serious about spending their way out of danger.
Record temperatures and devastating wildfires have swept across Europe these past weeks, while Russia’s war on Ukraine continues to be felt far beyond the battlefields. Everyone is feeling the heat, either literally or figuratively, with few exceptions.
It is often said that the European Union only grows in stature and geopolitical power during times of crises, because its constituent parts are normally unwilling to reform or dig deep into their pockets when the sun is shining.
The coronavirus pandemic was a prime example of this. Before Covid-19 brought large swathes of the global economy to a standstill, the prospect of the 27 EU members borrowing billions of euros through joint debt was totally unthinkable.
Now it is established practice. The executive branch of the bloc, the EU Commission, is currently in the process of doling out €800 billion in loans and grants to national governments, to be spent on pre-approved projects.
Borrowing such a large sum on the capital markets appears to have gone off without a hitch and there is now growing support for that Covid recovery fund to be used as a template, or at the very least an inspiration, for future schemes.
Take the climate crisis, which has for once generated headline news around the continent due to the consistent breaking of temperature records and some horrific wildfires. A lot of that €800 billion in recovery money is earmarked for green projects that will help combat climate change.
Governments are already funnelling their cash into wind farms, energy efficiency programmes and electric vehicle infrastructure. Slowly but surely, policies are starting to get the financial backing they need.
But it is still a slow process. No matter how much red tape Brussels tries to cut by simplifying planning regulations and procurement principles, project lead times remain substantial, and Russia’s war is cutting the appetite to ditch fossil fuels in the short term.
There is little the EU can do about that other than encourage governments to keep doing what they are doing, speed up renewable energy build-up and make sure funding keeps flowing where it is needed.
However, officials have started to get creative lately about what the money should be spent on. Wildfires are one of the most prominent effects of climate change, and the capacity to fight and contain potentially deadly blazes is becoming more and more valuable.
That is why the EU is aiming to procure its own fleet of fire-fighting aircraft to complement the 12 planes that are already held within a common pool. Details are still under wraps about how many, and which manufacturers will be chosen.
Crisis management has a budget of about €900 million per year, but that figure will almost certainly have to increase if the wildfire season grows as predicted and aircraft purchases need to be factored in.
Another area where the EU is trying to pool its resources and make better decisions is in the defence sector. Progress has been spurred lately by the war in Ukraine, which has made some governments think harder about what policies they need to focus on.
That is why the EU Commission has come up with a new plan to add €500 million into a common defence budget, which governments can spend on projects that boost the interoperability of their military forces.
Part of the idea is that it will reduce competition between member states for certain weapon systems. This leverages a new-found willingness to work together, which has been evidenced by tank-swaps between countries so that Ukraine can get more reinforcements.
“In addition to helping replenish part of the stocks following the transfer of arms to Ukraine, we are creating an incentive through the EU budget for member states to buy together. Europe’s defence is making great strides,” said EU industry chief Thierry Breton.
At least three countries will have to band together and come up with projects to be eligible for the cash, and the €500 million will be a complement to the €8 billion defence fund that is already up and running.
It is not the ‘EU army’ that a lot of tabloid newspapers incorrectly write about, but it is again a big leap forward in policies that were previously very unlikely ever to get off the drawing board.
Another way the EU is trying to solve its various problems through better technology is by encouraging governments to spend big chunks of money on things like electric vehicle batteries and semiconductors.
Brussels is loosening its strict state aid laws, which normally prevent governments from spending with impunity, if they are on projects that aid the EU’s common goals and involve more than one country.
This new system has already seen the likes of France, Germany, and Spain team up to build battery factories and promise big chunks of money for semiconductor tech, in a bid to compete with South-East Asian countries.
Earlier this month, a new project aimed at rolling out hydrogen infrastructure was launched. It again includes the EU’s major economic powerhouses, and energy analysts believe that the multi-million-euro investments will jump-start the sector’s potential.
Money is not always the answer but if it is spent correctly and at the right time, then it can work wonders. The EU certainly hopes that logic will pay off.
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