How to spend it: A proposal for a European Covid-19 recovery programme

Jérôme Creel, Mario Holzner, Francesco Saraceno, Andrew Watt and Jérôme Wittwer[1]

The Recovery Fund recently proposed by the EU Commission marks a sea-change in
European integration. Yet it will not
be enough to meet the challenges Europe faces. There has been much
public debate about financing, but little about the sort of concrete projects
that the EU should be putting public money into. We propose in Policy
Brief n°72 a 10-year, €2tn investment programme focusing on public health,
transport infrastructure and energy/decarbonisation.



The investment programme consists of two pillars. In a national
pillar Member States – broadly as in the Commission proposal – would be
allocated €500bn. Resources should be focused on the hardest-hit countries and
front-loaded: we suggest over a three-year horizon.

The bulk of
the money – €1.5tn – would be devoted to finance genuinely European projects, where there is an EU value added. We
describe a series of flagship initiatives that the EU could launch in the
fields of public health, transport infrastructure and energy/decarbonisation.

We call for
a strengthened EU public health agency
that invests in health-staff skills and then facilitates their flexible
deployment in emergencies, and is tasked with ensuring supplies of vital
medicines (Health4EU).

We present
costed proposals for two ambitious transport initiatives: a dedicated European
high-speed rail network, the Ultra-Rapid-Train,
with four-routes cutting travel times between EU capitals and regions, and,
alternatively, an integrated European
Silk Road initiative that combines transport modes on the Chinese model.

In the area
of energy/decarbonisation we seek to “electrify”
the Green Deal. We call for funding to accelerate the realisation of a
smart and integrated electricity grid for 100%-renewable energy transmission (e-highway), support for complementary
battery and green-hydrogen projects, and a programme, modelled on the SURE
initiative, to co-finance member-state decarbonisation and Just Transition
policies.

The crisis
induced by the pandemic, coming as it does on top of the financial and euro
crises, poses a huge challenge. The response needs to take account of the
longer-run structural challenges, and above all that of climate change. The
European Union should rise to these challenges in the reform of an ambitious medium-run recovery programme,
appropriately financed. An outline of such a programme is set out here
by way of illustration, but many permutations and options are available to
policymakers.

[1]              Andrew Watt: Macroeconomic Policy Institute (IMK),
Düsseldorf; email Andrew-watt@boeckler.de.
Jérôme Creel, Francesco Saraceno: OFCE, Paris. Mario Holzner: wiiw Wien. Jérôme
Wittwer: University of Bordeaux.