Op-Ed: Together for Europe’s Recovery

The COVID-19 pandemic presents an unprecedented challenge for the European Union and all of its member states. The EU economy will probably experience the deepest recession since the end of World War II. At the same time, climate protection remains a major task; digitalization offers great opportunities and the political and economic landscape is changing rapidly.

The EU is at a decisive turning point in our efforts to successfully combat the economic effects of the coronavirus pandemic and to prepare Europe for the future. We all share the goal that Europe emerges from this crisis stronger, more sustainable, more innovative, more climate friendly, and more united. Germany’s EU Council Presidency motto reflects this mission: “Together for Europe’s recovery.”

At their informal Ecofin meeting in Berlin on September 11 and 12, EU economy and finance ministers will discuss important elements of Europe’s recovery and future: implementing Europe’s recovery program, the future fiscal architecture, fair and effective taxation, financial markets in the digital age.

The Primary Task: Implementing the Recovery Plan Swiftly

In July member states agreed on an unprecedented recovery plan. The Multiannual Financial Framework (MFF) for the years 2021–2027 and the recovery instrument “Next Generation EU” amount to an impressive common response of about €1,824 billion. These funds are meant to set the EU and its member states on a path to a sustainable and resilient recovery, inter alia by creating high-quality jobs, supporting social inclusion, and repairing the immediate damage brought about by the COVID-19 pandemic, whilst at the same time supporting the EU’s green and digital priorities.

The major spending program under Next Generation EU, the Recovery and Resilience Facility, will offer large-scale financial support of up to €672 billion for investments and reforms, including in the field of the green and digital transitions, which should make our economies more resilient and better prepared for the future.

One of our main priorities during Germany’s EU Council Presidency is to finalize all the legal acts necessary to implement the MFF and the Next Generation EU package, including the Own Resources Decision and the spending programs such as the Recovery and Resilience Facility. This encompasses intense discussions both within the relevant Council bodies and with the European Parliament. We are determined to conclude the legislative acts during our Council Presidency so that the funds will be available in early 2021.

Toward a Fit-for-Purpose Fiscal Architecture in the 21st Century

In light of the exceptional nature of the challenge brought by the COVID-19 pandemic for economies across the EU, member states have decided that the European Commission will be authorized to borrow funds on behalf of the EU on the capital markets to finance Next Generation EU. Repayment of the borrowed funds will have to be borne by the EU budget, which is financed by the EU’s own resources. Therefore, member states have also agreed that the EU over the coming years will work toward reforming its own resources system and introduce new own resources. In Berlin, the EU finance ministers will explore the development of specific own resources for the EU and reflect on a fit-for-purpose fiscal architecture of the EU in the 21st century.

Furthermore, we need to think beyond the current period of acute crisis: we will have to ensure that Europe becomes more resilient, competitive, and independent. Being dependent for financial services on either the United States or China is not an option. If Europe does not want to be pushed around on the international stage, we will have to preserve and enhance financial sovereignty. We want to achieve that by strengthening the Banking Union, advancing the Capital Markets Union, and promoting a secure and innovative digitalization of the financial markets. A strong European banking sector and reliable access to financial markets are also the basis for a sustainable and complete recovery.

Fair and Effective Taxation

We are also continuing our efforts to shape a fair and effective taxation in Europe. Modern and innovative tax policy is crucial to promote the EU’s economic strength and to safeguard member states’ tax revenues. In light of the results of the negotiations on a reform of international taxation principles at OECD level, the German Council Presidency intends to take forward discussions on their implementation in the EU. This includes the introduction of a globally effective minimum tax ensuring that all multinational enterprises, including digital corporations, pay a fair amount of taxes and contribute to the common good of all Europeans. The fight against tax avoidance and evasion requires more international cooperation and coordination. This comprises the further optimization of administrative cooperation and the exchange of information between EU member states.

Europe’s recovery will take longer than six months. However, it is important that we start now and that we set the right course during the German EU Council Presidency.

Jörg Kukies is state secretary at Germany’s Federal Ministry of Finance.