Rebuilding Better: Learning From the past to Create a Strong New European Economy
The COVID‑19 pandemic has left Europe facing huge change – but also great opportunities, speakers at a Brussels Economic Forum panel and debate on the new European economy after Coronavirus said. Restarting trade, boosting employment, and pushing ahead with climate targets, all offer the possibility of new beginnings for EU citizens and policy makers, they said.
European Commission Executive Vice-president Valdis Dombrovskis said Europe was emerging from “hopefully the worst of the pandemic.” He agreed with other speakers at the event that digital and climate change policies would be key to a “strong and inclusive recovery” across the EU. “This crisis has not changed EU ambitions to make green and digital transitions,” he said. “We need to push ahead with energy efficiency, renewable energy, hydrogen power, electromobility and much more.” He warned “it all comes with a hefty price tag of course. But Europe is on the brink off massive change - and opportunity too.”
Commenting on Commission President Ursula von der Leyen’s decision to name him as the new EU Trade Commissioner, an announcement made on the same morning as the BEF, Dombrovskis said in the fight against the virus as elsewhere, “we remain committed to a multilateral rules-based system… It’s important to preserve our European approach.” As the world looks for ways to continue or overhaul trade, he added “we still believe in the WTO, but obviously the WTO needs reform.”
The trade response to the pandemic will be “important,” Dombrovskis said, but “first and foremost we need to listen to the epidemiological advice on what to do. That’s what we did. So far it’s working.”
A deal with China on an investment agreement was possible before the end of this year but there were still a number of challenges and imbalances in the relationship and the EU would prioritise “substance before deadlines,” he said.
Regarding the EU’s trade relationship with the US, Dombrovskis said that discussions on some targeted “mini deals” were ongoing and that “the good news is that we are avoiding the kind of further escalation of tensions that was taking place a year or so ago.”
Maja Göpel, Secretary-General of the German Advisory Council on Global Change, said “the model of development we had before coronavirus was already not a good one.”
The EU and the world were already facing crises of democracy, inequality, and climate change, she explained, “but we were following indicators that don’t give a hint we might even have a problem.”
“Now we have a really good opportunity to restore stability and prosperity,” Göpel said. “A lot of people were having difficulty breaking out of old patterns before – now they are wide open.”
She said priorities agreed by the EU before this year had been strengthened by the crisis. “We are clear on what we want to achieve: a green and social deal,” she explained. “This is the new narrative of Europe.”
Coronavirus has helped people to see the connection between health and the environment more clearly, said Göpel. Climate change targets should be the centre of debate as people look for the best way forward, she said.
“It’s crucial to show why this is a win-win situation.” Reducing resource use by building “circularity” into the economy, and moving to a decentralised renewable energy system, will both create many new jobs, Göpel explained. “This is what the sustainable development agenda was putting forward already.”
Plans for a carbon border adjustment tax to penalise high-emission imports and for a Just Transition Fund to help regions close down coal mines, were both on the EU agenda before the pandemic, noted Göpel . “We should be able to avoid back-tracking, but this does mean facing change,” she concluded.
Martin Sandbu, European Economics Commentator at the Financial Times, said there was “an awareness at the top that we should not just rebuild, but build better.”
In particular, he said it was important to ensure that the people worst hit by the pandemic did not suffer from any moves to restart economies. We need to remember that people most likely to have “lost jobs and faced the biggest uncertainties” were the same people “already struggling most in the imperfect economies we have in Europe,” he explained.
“The people of Europe need to feel that politicians have their back,” he warned. He said these politicians had so far “made a good job of responding” to the crisis, with fiscal and economic support. But he said politicians should learn from mistakes made responding the euro area crisis of 2009 and after, and “don’t remove support too soon.”
“The best way to make people confident about the economy is to make the economy strong,” said Sandbu.