NO REARM-EU WITHOUT A SERIOUS COMMON BUDGET FOR GREEN AND DIGITAL TRANSITIONS

Spring is fast approaching in Brussels too, but few are paying attention as they are too busy keeping up with all the announcements being made these days.

The latest in the series is the 'ReArmEU' plan, which is quite a scary title, announced yesterday by President von der Leyen. And then, of course, there's the 'Clean' industrial Deal, unveiled by the relevant Commissioners on February 26th, which aims to complement the Green Deal by supporting companies, particularly energy-intensive ones and those specialising in 'clean tech', with ad hoc incentives and lower bills. Why do I mention this together? Because it's very clear that these plans involve public spending, huge public and private investment, which will require difficult choices. It's interesting to note that the same figure, 800 billion euros, is mentioned both for the RearmEu programme and for ensuring greater competitiveness of the European economic and production system, as outlined in the Draghi report.

UVDL presented the ReArmEu plan by proposing three things, some of which are very worrying, even for those like me who have long been convinced of the urgent need for a common European defence.

- The suspension of the Stability Pact for defence spending at national level, and if this translates into an average increase of 1.5%, it would create a fiscal space of 650 billion euros to buy weapons.

- A programme of loans of 150 billions for defence spending, to be financed with funds tob e found on the financial markets guaranteed by the EU to the tune of 150 billion euros

- Opening up the use of cohesion funds for military expenditure.

All this without clear conditions, or so it seems at the moment, or strict commitments to joint projects or systems capable of acting together, except for the loan part. What's more, there has been no impact assessment of these proposals, nor a precise analysis, which is urgently needed at this point, of how much "rearmament" would really be necessary to put together an integrated defence system, instead of buying or producing weapons at full speed at national level, with the effect of wasting enormous resources and perhaps competing with other European producers. In fact, it is very important to bear in mind that spending on armaments has reached an all-time high in recent years and that, contrary to what is constantly repeated, EU countries are not spending little, but spending badly. Before blocking enormous resources that we hope will never be used, a careful assessment of what is really needed should be made, instead of letting each country be led by its arms industry.

This is also because all this willingness to act immediately in order to obtain huge resources to be found on the market with a "Made in EU" guarantee, even touching on policies designed to reduce inequalities between regions such as the Cohesion Fund, is not found in the case of the Clean Industrial Deal, which proposes a fund of 100 billion euros but does not provide for a common financial instrument capable of substantially increasing the tiny European budget, which represents only 1% of European GDP, to facilitate public and private investment in the dual green and digital transition. The €100 billion announced to support decarbonisation and industrial electrification are mostly existing resources: the Innovation Fund (around €20 billion), voluntary contributions from Member States (€30 billion), additional revenues from parts of the ETS (€33 billion) and the revision of InvestEU (€2.5 billion).

But let's start at the beginning: the Clean Industrial Deal and the Action Plan for Affordable Energy were published on Wednesday 26 February together with the so-called Omnibus1 and were eagerly awaited by industry, both by those who want to dismantle the Green Deal under the illusion that remaining fossil fuel based will make them more competitive, and by those in the manufacturing sector who have already invested in the transition.

The Clean Industrial Deal remains consistent with the vision of the Green Deal and emphasises how meeting our climate goals can boost competitiveness.

The Commission proposes to act on six 'enabling' factors for greater competitiveness, including: lower energy prices, increased demand for green products made in Europe, the circular economy, the review of public procurement, the new state aid framework and the phasing out of fossil fuels. And a very positive aspect is that priority is given to investment in existing clean technologies, especially renewables and efficiency, rather than those that would actually slow down the transition because they will not be available for a long time (e.g. 'clean' (??) nuclear, CCUS or low-carbon hydrogen), although they are still mentioned.

But this is not the position of many governments and political forces. And indeed, the battle will be over what is considered strategic for the future, and which industries should be given more support in their transition, and at whose expense. And, thanks to a good deal of propaganda, they deliberately lump together existing solutions, renewables, heat pumps, networks and energy efficiency technologies, and others to come (if they ever do) and very expensive ones such as CCS, hydrogen or nuclear.

Furthermore, the Commission's proposal does not address the issue of decoupling the price of gas from the price of electricity, and considers that it is primarily the responsibility of the Member States to act on prices, in particular through taxation. and paves the way for a reform of state aid, which could represent a further push towards the nationalisation of industrial policy, as well as exacerbating the imbalance between states that can support their companies and those that do not have the budgetary space to do so. Furthermore, pollution and biodiversity loss are completely absent, and circularity remains a separate sector, disconnected from decarbonisation. Above all, there is a complete lack of a participatory governance framework for this 'business transformation plan' that would help ensure a socially just and equitable transition. The dialogue promised by the President at the beginning of her mandate has so far only taken place with energy-intensive companies and sectors most dependent on fossil fuels, such as the chemical industry. The President rushed to speak to 450 CEOs gathered in Antwerp on the same day as the presentation of the plan, but in 5 years she has never received the environmental NGOs. The same goes for the car and steel plan, since only the companies were consulted.

But by far the most worrying aspect is that, together with the CID and the mantra-like repetition of its loyalty to the climate neutrality targets, the Commission has also presented the so-called Omnibus 1, a proposal to simplify and ultimately dismantle the Environmental Reporting Directive and the so-called Due Diligence Directive, already adopted and partially in force, on which a risky step backwards has now been taken. Much longer deadlines and very broad exemptions that radically reduce the scope of provisions that could perhaps have been simplified, but without reopening the regulation itself: because the Commission's proposal will now go to the European Parliament and the Council of Ministers, who, as co-legislators, can do with it what they like. Given the new majorities, there is no doubt that it will be further emptied of content. And since the Commission has already promised Omnibus 2 and 3, it is clear that this risk also exists for other important regulations already adopted, starting with those on energy efficiency.

But by far the most urgent question is to understand how the Commission intends to achieve these objectives and, at the same time, rearm the EU, without taking responsibility for proposing a plan for European funding and an increase in the budget, together with governance reforms that allow for greater cohesion and that can put into practice the grand words about the need for genuine European autonomy that have been proclaimed in recent days.

Monica Frassoni 5/03/2025