Enhance the Role of European Public Goods

European public goods and their purposes have been highly debated by academics and policy makers, particularly in light of the ongoing negotiations on the new Multiannual Financial Framework. At the seventh “Economics Jour Fixe” Meeting in April 2018, BDI discussed the priorities for German businesses with other economic policy experts and MEP Jakob von Weizsäcker.

Europe’s priorities in public spending

The current EU expenditures on agriculture, cohesion, innovation, infrastructure, migration, security and other areas vary considerable in size and objectives. In many cases, the preferences of the 28 Member States are different and it is highly complicated to find compromises. A potential solution would be to form coalitions of subgroups of countries with similar interests with respect to a specific public good. This would certainly mean multi-speed Europe and a potential fragmentation of the Single Market. Furthermore, free-riding is a problem imminent to public goods. For instance, middle European countries could benefit from a common security and migration policy of countries of the periphery.

Shock absorption and macroeconomic stabilization

European public goods clearly improve the euro area’s capacity to absorb symmetric and asymmetric economic shocks. To strengthen the resilience of the crisis-prone European Economic and Monetary Union, it is thus highly appreciated that Capital Markets and Banking Union as well as the Energy and Digital Union are getting deepened. One main conclusion of the debate was that a complete Single Market and a significant number of European public goods would be more efficient in macroeconomic stabilization than an artificial fiscal capacity for the euro area.

Future of the EU budget

The current proposal on the new Multiannual Financial Framework for 2021-2027 outlines significant changes of the current budget. One the one hand, the leaving of the United Kingdom creates a financing gap and on the other hand new priorities like migration and security emerge. Furthermore, investment in innovation and pan-European infrastructure needs to be stepped up to maintain and possibly improve competitiveness of the EU economy.