Sose Mayilyan (DCU)
On 24-25 February 2022, DCU’s first Jean Monnet Centre of Excellence, REBUILD was launched. The kick-off event gathered prominent experts and policymakers to discuss the background behind the Next Generation EU (NGEU) recovery tool. The keynote speakers and panellists addressed various topics related to the NGEU, including the issues of its governance, values and funding.
The event was opened by an introduction by Federico Fabbrini (Full Professor of European Law at DCU, Founding Director of DCU Brexit Institute and Principal Investigator at REBUILD), who outlined the importance of this timely initiative for Ireland and for the EU.
It was followed by the opening keynote speech by Paschal Donohoe (Eurogroup President, Irish Minister of Finance). The Minister emphasised that REBUILD will serve as a crucial forum for the effective engagement of researchers, policymakers and civil society actors. Noting the large amount of work that has been done to this day with regard to the Banking Union, Minister Donohoe stressed his commitment to fulfilling the Eurogroup mandate of finalising a work plan for the completion of the Banking Union. The Minister emphasised the need for Eurogroup (and the EU at large) to find the balance between debt sustainability and funding growth and investment.
Afterwards, Florentine Hopmeier (Cabinet of Ursula von der Leyen, European Commission President) presented her introductory remarks. She noted that the NGEU recovery plan is unprecedented due to the way it is financed, as well as due to what it finances and its governance. She emphasised the link between NGEU and the European Green Deal, whereby the issuance of bonds as part of the recovery plan will make the EU the largest green bond issuer worldwide. Besides, the strong commitment of Member States and the dedicated support from the European Commission on NGEU contribute to further enhancing the cooperation within the EU.
Panel 1 on the topic of “Next Generation EU (NGEU) & Europe’s Economic, Monetary and Banking Union” was chaired by Federico Fabbrini (Full Professor of European Law at DCU, Founding Director of DCU Brexit Institute and Principal Investigator at REBUILD).
The first presentation of the panel was by Erik Jones (Director of the Robert Schuman Centre, EUI), who stressed that the economic consequences of the policy response to the pandemic were possible to overcome, largely due to the establishment of debt mutualisation through NGEU. Discussing the more challenging aspects of the recovery plan, Professor Jones noted that it is not possible to predict how a decade of monetary accommodation will affect the banking system. The European Central Bank will have a lot of heavy lifting to do to ensure the smooth progress of the recovery plan.
Laure Clément-Wilz (Professor of EU Law, Université Paris-Est Créteil) discussed the interconnection between post-NGEU European Union and European sovereignty. She noted that while the concept of European sovereignty may not be found in EU law texts, it becomes more evident when unpacking other related concepts, such as the concept of strategic autonomy. Through this, Professor Clément-Wilz argues, the Regulation establishing the Recovery and Resilience Facility is closely linked with the idea of European sovereignty.
Afterwards, Fabian Amtenbrink (Professor of EU Law, Erasmus University Rotterdam) talked about the role of the European Central Bank in relation to the NGEU, foreseeing new legal challenges against the ECB. He drew attention to the fact that throughout the pandemic, the Member States and the EU itself acted rather swiftly and precisely in the economic policy domain. Moreover, the fiscal policy at EU level in the current pandemic is proving much more prominent than it did in past crises. Professor Amtenbrink noted that the current recovery and resilience plan must be geared towards restoring employment, job creation and investments to revive sustainable growth.
The panel was followed by a presentation by Christy Ann Petit (Assistant Professor of EU Banking & Finance Law, DCU), who discussed Europe’s Banking Union after NGEU. She noted that the NGEU can help in diversifying the balance sheets of banks and investment firms, which can be successful as a medium-term or more long-term plan and if it involves an adequate volume of bond issuance. To ensure the proper functioning of the established system, the European Commission relies on the performance of bond issuers, and to succeed, the Commission would need to monitor the network which supports market operation, as well as the placement of EU borrowing. Dr Petit also mentioned the crucial role of NGEU in supporting a greener and more digital EU recovery plan.
Panel 2, chaired by Karine Caunes (Editor in Chief, European Law Journal) focused on the topic of “Governance: How does the NGEU work?”.
Amy Verdun (Jean Monnet Professor of Political Science, University of Victoria, Canada) discussed the NGEU in connection with the European Semester and structural reforms. She noted that the NGEU presented a major change in the Union policies as a rather large-scale project. As the European Semester became part of the Recovery and Resilience Fund, this integration changed the economic policy coordination. Particularly, some Semester vehicles were frozen, while others were significantly transformed. Professor Verdun noted that this change presents opportunities and resources for strategic agency by social affairs players to play a stronger role in the European Semester.
Michael Breen (Associate Professor of Political Economy, DCU) followed up with a discussion on the importance of avoiding corruption. He noted that the NGEU, instead of being seen as a public spending programme, can be considered as a foreign aid programme due to its international dimension, which means it can be particularly vulnerable to corruption. According to Dr Breen, while the anti-corruption mechanisms provided by the NGEU are to be welcomed, the instrument could have provided a more meaningful engagement and directed more of its funds towards anti-corruption measures. Regarding the NGEU conditionality principle, he noted that the EU’s version of conditionality is rather focused on holding governments accountable for failure to meet EU standards.
Afterwards, Richard Crowe (Legal Service, European Parliament) followed this debate by discussing the NGEU and the role of parliaments in democratic control. He noted that while EU institutions have control over the NGEU, systems of parliamentary control and scrutiny are not yet well adapted to the new instrument. Therefore, the EU institutions relied on the Inter-Institutional agreement on Cooperation and Budgetary Matters in order to exercise their powers of oversight. He noted that the European Parliament had crucial influence in the adoption of the Recovery and Resilience Fund. Nonetheless, it also presents challenges in terms of how the discharge procedures should be arranged by the European Parliament.
Julio Baquero Cruz (Legal Service, European Commission) discussed the use of the intergovernmental method in NGEU, drafting and the future of EU governance. He noted that there is a trend of gradual mutation of the European system, as a strengthening of the intergovernmental element is happening across spheres in the EU. Discussing the NGEU, he drew attention to the fact that in the drafting of the instrument, the policy came first, and the relevant resources were expected to be determined at a later stage and should be tantamount to the agreed policies. While the NGEU is significant in terms of its substantive policies, he does not see it as a step towards constitutional change in the EU, but rather as a confirmation of the intergovernmental tendencies present in the Union.
Panel 3, chaired by Derek Hand (Dean of the Faculty of Humanities and Social Sciences, DCU), involved discussions on the topic of “Values: What are the Criteria & Principles Shaping NGEU?”.
The panel was started by Diarmuid Torney (Associate Professor of Climate Policy, DCU) who talked about the green transition. He noted that the priorities of the European Green Deal and NGEU include, inter alia, elimination of net emissions by 2050, a focus on green areas such as renewable energy and sustainable transport and allocation of at least 37% of Recovery and Resilience Funds to climate funding. Stressing that the NGEU has been developed as a key enabler of the green transition, Dr Torney also argued that some challenges are, nonetheless, present. Particularly, while the target of 37% is very welcome, it poses a risk of Member States not aiming to allocate the remaining funds to climate funding or other sustainable projects. Moreover, the proposed Carbon Border Adjustment Mechanism (CBAM) may not be an effective tool in combating climate change in the EU as its ultimate objective is to inspire other jurisdictions to raise their environmental standards.
Afterwards, Edoardo Celeste (Assistant Professor of EU Data Protection Law, DCU) discussed the issue of digital transition. He noted the strong link between the digital and green transitions set out by the EU and mentioned that the digital transition is, perhaps, seen by the EU as a tool used to achieve green transition. Discussing the draft Declaration on Digital Rights and Principles recently published by the European Commission, Dr Celeste noted that it will hold a particular value compared to other initiatives adopted by the Commission. Despite its hybrid tone, the Declaration is not solely a declaration of rights but can also be considered a policy document.
Petra Bard (Professor, CEU) talked about the Rule of Law Conditionality Regulation. She noted that the EU initially presented a failure to act upon rule of law violations in its Member States, despite the constitutional authorisation and the obligation foreseen by the Treaties. In the revised version of the Regulation, the focus on rule of law shifted and the Regulation placed an emphasis on the importance of the protection of EU financial interests instead. Professor Bard argued that the Regulation is a crucial addition to EU law texts, as it comprehensively codifies the field, as well as provides a non-exhaustive list to serve as guidance on what situations can indicate breaches of rule of law. The recent rulings of the Court of Justice of the EU in Cases C-156/21 and C-157/21 are also setting a landmark point in the principle of rule of law conditionality, as the Court dismissed the allegations that rule of law cannot be defined with special clarity and emphasised the link to solidarity and mutual trust.
Panel 4 on the issue of “Funding: How is NGEU funded and how will EU borrowing be repaid?” was chaired by Ken McDonagh (Head of the School of Law & Government, DCU).
The first speaker of the panel, Carlo Garbarino (Professor of Tax Law, Bocconi University) discussed the OECD Tax Deal and its EU and global implications. Talking about the recent EU proposal on adopting an EU Directive on OECD pillar 2 taxation, he noted that the EU is acting very quickly and very diligently in trying to adopt a top-up tax on global profits on any multinational companies based in any of the Member States. As regards the NGEU, Professor Garbarino noted that, essentially, the EU will fund the infrastructure expenditure for Member States which, however, will not legally be paid back by the Member States. Finally, while the NGEU is currently functioning as an emergency measure, it also has the potential to become the building block upon which the introduction of OECD pillar 2 tax is introduced in the EU.
Afterwards, Goran Dominioni (Assistant Professor of EU Environmental Law, DCU) followed up with a discussion on the Carbon Border Adjustment Tax. He notes that the current European Commission proposal suggests crediting only for specific types of policies carried out outside the EU, such as carbon taxes and emission trading schemes. This approach has been broadly criticised by various policymakers in the US and by the OECD. While it is likely to increase the uptake of climate policies abroad by targeting decarbonisation incentives, it is also likely to result in more climate change outside of the EU. In terms of its administrative feasibility, Dr Dominioni acknowledged the difficulty in crediting for policies other than the ones in the proposal. However, he argued that a gradual approach could be beneficial and feasible to implement.
The panel was followed by Niall Moran (Assistant Professor of EU Trade Law, DCU), who talked about the compatibility of CBAM with WTO provisions, particularly with The General Agreement on Tariffs and Trade (GATT). Dr Moran noted that there are several GATT Articles which CBAM may be breaching. Particularly, with regard to the concept of like products under the GATT, the test currently focuses on the commercial relationship between products, which leads some scholars to believe that CBAM will certainly breach this provision. However, CBAM may come under the exception set out in GATT Article III, if it includes a legitimate objective, is non-discriminatory and meets the non-disguised restriction test.
Tomasz Woźniakowski (Excellence Initiative Research Fellow, Nicolaus Copernicus University in Torun) followed up the discussion by comparing taxation and federalism in the EU and the US. Building upon the theory of federalism developed by William H Riker, Dr Woźniakowski discussed the conditions under which fiscalisation is likely to emerge. He noted that in the case of the EU it was triggered by the internal sovereign debt crisis, rather than external military threats as Riker’s theory posits. Connecting the issue with the NGEU, he stressed that despite its innovative nature, the adopted instrument is still limited in its timeframe and scope. Besides, the Member States may have to eventually pay back the borrowings with increased contributions, decreasing the overall EU budget capacity. Dr Woźniakowski also emphasised the importance of making the benefits of fiscalisation clear to the main opponents of the idea.
The final roundtable debate discussing the future of NGEU was chaired by Shona Murray (Europe Correspondent, Euronews).
The debate was opened by Shahin Vallee (Economist, OECD), who noted the crucial role of recovery and resilience instruments built as a result of the pandemic. He also stressed the importance of the adoption of the SURE mechanism to address national unemployment insurance schemes. Dr Vallee argued that in order to take further steps in ensuring a post-pandemic resolution, there is a need to undertake institutional changes in the Treaties in order to ensure a stronger democratic accountability. He also predicted that this issue would be challenged continuously before courts, once again proving the need for institutional changes at EU level.
Afterwards, Vivien Schmidt (Jean Monnet Professor of European Integration, University of Boston) discussed the roles of EU institutions in relation to pandemic governance and Recovery and Resilience Fund. She noted that the European Parliament, while initially (at the start of the pandemic) rather secluded, returned to play its role in the budget negotiations later. Moreover, with regards to the Recovery and Resilience Fund, Professor Schmidt argued that the national parliaments also began to play an important role. Touching upon the European Semester, she mentioned that it needs to be decentralised and democratised, and that the European Parliament should have a greater involvement in the Semester.
Finally, Federico Fabbrini (Full Professor of European Law at DCU, Founding Director of DCU Brexit Institute, Principal Investigator at REBUILD) discussed the NGEU from legal, institutional and political viewpoints. From a legal outlook, he argued that while it is a temporary instrument, there is no provision preventing it from becoming a permanent one. From an institutional aspect, in order to continue NGEU implementation beyond the pandemic emergency, some constitutional shortcomings of the EU architecture would need to be addressed. Finally, from a political and strategic point of view, Professor Fabbrini noted the EU needs to be well aware and conscious of the changing geopolitical panorama and threats, stressing that there cannot be a balanced budget at EU level if any defence mechanisms are to be established.
Sose Mayilyan a PhD researcher in EU Law at Dublin City University, exploring the topic of free movement of persons and social benefits from an interdisciplinary perspective. Their expertise also includes research and analysis on Brexit’s legal and policy aspects.