EPRS Strategy By / December 13, 2021

The political science of Next Generation EU: Exploring potential impacts of the new recovery fund

The NGEU provides an opportunity for the institutions to connect and reconnect with citizens. We can no longer imagine a world without NGEU, but it is important to keep in mind the significant strain it puts on the institutions and other EU initiatives, such as cohesion policy.

How to ensure effective democratic control and parliamentary oversight of NGEU?

Written by Joanna Apap with Paulien Van de Velde-Van Rumst

On Tuesday 16 November 2021, the European Parliamentary Research Service (EPRS), the European University Institute (EUI) and the EP’s Directorate-General for Internal Policies of the Union (IPOL) jointly organised an online policy roundtable on ‘The political science of Next Generation EU’. The roundtable explored the potential impacts of Next Generation EU (NGEU), with the Recovery and Resilience Facility (RRF) at its heart, and resulted in a fruitful exchange of views between parliamentarians, high-level academics and policy analysts. From the outset, the introductory remarks highlighted the innovative nature of the new recovery fund – both in terms of its scope and means of financing – and its great symbolic and institutional implications. Three subsequent panels discussed these implications and the potential of NGEU as a model for the future.

The potential impact of NGEU on EU institutional dynamics and balance

A first panel delved into NGEU’s impact on EU institutional dynamics and on EU-Member State relations. The speakers identified clear shifts in the role of the EU institutions, as well as more positive politicisation and a more cooperative dynamic between the institutions, compared with during the Eurozone crisis. The NGEU’s anchoring in the EU budget was generally welcomed in light of the European Parliament’s scrutiny role. Further institutional gains for the Parliament include the Recovery and Resilience dialogue with the European Commission and the agreement that future measures based on Article 122 TFEU will be adopted after a structured dialogue with the Commission and the Council, even though this arrangement is not formally provided for in the Treaties. The RRF, however, relies greatly on national recovery and resilience plans (NRRPs) and thus on projects generated by the Member States. The oversight of these plans lies with the Commission, in addition to its responsibility for the borrowing operation required for NGEU. The Commission’s role has thus been reinforced, whilst the final say on the NRRPs remains with the Council, which entrusted the Commission with the operation of all the programmes.

In parallel, the more ‘bottom-up’ exercise with the Member States to come up with NRRPs is an innovative aspect, introducing a decentralisation and democratisation of economic governance. Such ‘bottom-up’ involvement could help to repurpose the European Semester and lead to the creation of a permanent fund that could be combined with the establishment of an industrial policy dialogue with all stakeholders.

Last but not least, the European Court of Auditors (ECA) is a key player in scrutiny because of its mandate to audit NGEU. The NGEU’s clear objectives of funding the green and digital transition and of addressing social inequality might make it appear easier to assess Member States’ compliance and results. Nonetheless, several challenges were mentioned in this regard: How will a partial achievement be considered? How can one assess whether reforms have actually resulted in the intended structural changes? Considering the Member States’ financial and administrative absorption capacity, how much additional public investment will the RRF actually generate? The ECA has in any case put a comprehensive audit strategy in place with a robust method to assess compliance and a sequence of performance audits for selected aspects.

The first panel agreed that implementation of NGEU by the different EU institutions will prove to be key and that citizens must be at the heart of considerations: value for money and visibility of the objectives of NGEU funding are vital.

The potential impact of NGEU in shaping public perceptions of the EU

A second panel assessed the potential impact of NGEU to shape public perceptions of the EU. As Member States implement the NGEU programmes, public perception of the EU is dependent on national administrations. To bridge this gap, the EU plays an important role in scrutinising the NRRPs. The Flash Eurobarometer on NGEU showed that the public position aligns with the Parliament’s: the rule of law conditionality enjoys great support and there is a call for transparency and effective control of NGEU. The public is also in favour of consultation with regional governments, municipalities and civil society on how the funding is spent. The successful implementation of NGEU could therefore have a considerable impact on the elections to the European Parliament in 2024. For NGEU to influence public perceptions of the EU, it must be salient to citizens. If the recovery and the green and digital transitions are successful, all spending will appear national. ‘The NGEU’s repayment and potential decision to make it permanent will also be significant to public opinion’. Linking up these targets and conditionality with the EU’s long-term budget would also be desirable – even more so, considering the findings of the ‘Green Wedge’ study. Public attention to spending could be drawn by two very different types of dissent: young activists are judging all government-bodies on how fast and effectively they are taking climate action, while anti-climate populism is growing. Should there be an intention to make NGEU programmes more permanent, progress on real own resources could be the way to escape the debate on net contributors versus net beneficiaries of the EU budget. The new own resources are moreover imperative to be able to speak of a ‘Next Generation’ EU. An issue that came up regularly in discussion in the third panel.

How to ensure effective democratic control and parliamentary oversight of NGEU?

The third and final panel addressed democratic oversight of NGEU and accountability at the European and national level. As discussed in the second panel, the public has clear priorities on a number of issues touched upon by NGEU. To fulfil these expectations and to make NGEU a success, democratic input and parliamentary oversight are of crucial importance. It was pointed out that NGEU brings along a huge consideration of distributional fairness. Such fairness cannot be established without representation. Citizen representation should not only take place within the EU institutions: national scrutiny is more important than ever. However, parliamentary scrutiny is rather limited in this respect. National parliaments scrutinised ex-ante their general budget priorities linked to the NRRPs. National control and auditing systems, that have the backing of the ECA, had to be put in place. Moreover, there is considerable variation between Member States in levels of transparency, debate, and the inclusion of regional and local authorities, civil society organisations and social partners. Consequently, there is a need for a democratic panopticon around the NGEU that would ensure citizens have access to information on how and where the money is spent. To enhance the European Parliament’s role in this context, the panellists from academia made a couple of suggestions. As the Commission largely designed and is managing NGEU, the European Parliament could focus its energies on providing itself with a similar level of expertise. In doing so, it will gain a respected reputation on its pronouncements on the fiscal impact of decisions, independent of the executive and the Member States. The creation of a European Parliament Budgetary Office, which could provide non-partisan and reliable expertise, could be an option in this regard. We could also rethink the role of the European Parliament as a debating chamber whose role is to provide a forum in which citizens’ representatives find ways to reach out to other stakeholders in the European polity. Lastly, an electoral campaign intended to dictate the agenda for the executive, could allow citizens to express their opinion on this agenda.

To date, the European Parliament has managed to live up to its ambitions and is in a position to exert pressure on the other institutions involved. It acquired several tools for scrutiny over the course of the NGEU negotiations. The Parliament has a right to full access to information on an equal footing with the Council, there is the Recovery and Resilience Dialogue, and the Parliament will review the reports the Commission has to deliver for the evaluation of NGEU. In parallel, an internal working group in the Parliament will perform its own evaluation and provide input to the Commission. Moreover, to look after the ‘Next Generation’, the Parliament has pushed for an interinstitutional agreement, including a roadmap, to create the new own resources for the EU that need to be sufficient for repayment of the NGEU debt.

Nonetheless, the Members of Parliament taking part in the panel identified a number of challenges. Firstly, national parliament participation should be improved, as only a few of them have actually voted on their respective NRRPs. Secondly, one Member of Parliament denounced the Council’s refusal to allow the creation of a digital platform listing all beneficiaries of funding. Such a platform could have provided the start of a democratic panopticon. Thirdly, ongoing scrutiny of the payment requests under NGEU is indispensable. Instead of a mere transfer of funds into national budgets, NGEU established European priorities and the control of issues such as greenwashing, fraud, the effectiveness of projects, should therefore be upheld within the European Parliament. Finally, how NGEU could become a permanent structure should be discussed. Such a permanent structure would be part of a new economic governance model and could restore the principle and credibility of the European Semester. The six pillars of the NGEU (green transition; digital transformation; economic cohesion, productivity and competitiveness; social and territorial cohesion; health, economic, social and institutional  resilience; policies for the next generation), should also be maintained and inserted in other programmes.

In sum, the whole chain of democracy and accountability has to come together: how the money is spent will depend on the citizens, stakeholders, partners and governments at national level. Nevertheless, what happens at the national level needs to be empowered and enabled by what happens in Brussels. In this respect, it is also of great importance to communicate to citizens and to help them understand the considerable role that the European Parliament has played and continues to play in NGEU.

Conclusion

The NGEU provides an opportunity for the institutions to connect and reconnect with citizens. We can no longer imagine a world without NGEU, but it is important to keep in mind the significant strain it puts on the institutions and other EU initiatives, such as cohesion policy. The numerous accountability mechanisms could possibly work at cross-purpose and complicate the works on an already crowded institutional agenda, both nationally and at European level. The most recent budget negotiations are nonetheless a hopeful sign: they are conducted with the NGEU repayments in mind, to ensure a budget for the next generation.

To watch this event online, please click here.

You can find the next coming EPRS online events here

Relevant links for further information on this theme:


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