“Europe is poor and the transition is very expensive”: oh, really?

The battle for the post-2027 European budget has begun. The pawns are being moved across the chessboard, and the campaign for the European elections provides the perfect backdrop for the somewhat caricatured positions between the North, which is “frugal” with public funds, and the South (and also the East), which tends to spend lavishly. It’s all about austerity once again, even if it means denying a reality that is far more complex. The Iberian Peninsula has not exploded its budget deficits to cope with exorbitant energy prices; it has regulated them and benefited from a decade of energy policies aimed at making Portugal and Spain less dependent on world markets and increasing their renewable production capacity.

The “frugal” club is only frugal in name; its members are not advocates of sobriety, far from it… quite the opposite in fact. The new objectives are to produce more and more (weapons, cars and food); the driving force of economic growth is shifting to new sectors but remains at the heart of the project.

However, for the first time, leading European economists have clearly questioned this objective and are convinced that budgetary forecasts and public policies cannot be made for the future without asking the question about the future. Yes, you can accumulate debt if you have a future, but if that future is not guaranteed, what happens then? Economists from the think tank Bruegel have therefore come up with a different approach for the future European budget. The transition to climate neutrality is not just another objective. It is the condition for long-term survival, and this justifies the introduction of different rules both now and in the years to come.

At what point does the transition become too expensive? Not all options cost the same. So when will they be discussed?

“We could rethink public spending”

For example, for this budgetary period, the agricultural policy budget for 2021-2027 amounts to €380 billion, which is more or less one third of the European budget. What would this mean for the 6 million agricultural holdings in the European Union (This figure is falling sharply: it was 7 million at the start of the period, and projections for the end of 2027 are highly questionable) ? Well, it could mean as much as €750 per month per farm for the whole period, in addition to the income from production. It would be a choice.

Another example is the €85 billion (at the very least) that will be needed to build new nuclear power stations across France. What does this figure represent[i]? It’s always difficult to approximate, but a priori this budget would be sufficient to renovate 1,700,000 homes, or 18% of the primary housing stock. Once again, it’s a matter of choice.

But when will the European public be able to debate the choices being proposed? And who will have the last word?

In recent votes in the European Parliament, a new rule was adopted in connection with the Stability and Growth Pact. This defines the acceptable level of deficit and debt for each country. This applies to all levels of government, and these rules have long been a barrier to funding cities’ climate neutrality strategies. The new rule, which is in addition to the existing ones, stipulates that budgets co-financing projects financed by the European budget will no longer count towards deficits and debts. This gives the European Commission a much greater say in defining investment priorities. But where will they be discussed? With whom? And how can we ensure that all local authorities have access to this new “facility” when so few local authorities are involved in European programmes?

We could explore new ways of rethinking public spending. In addition to elections, debates are changing and are clearly more open to taking a different look at public spending. However, this does not yet seem to be a transparent and inclusive debate, particularly for those most directly concerned, those who will implement the projects to transform our economy and society: the local and regional authorities.

[i] For example, France has 30 million primary residences, and thermal renovation costs an average of €50,000 (high end). €85 billion (including the current budget overruns for each new project) would cover the renovation of 1,700,000 homes. Source: based on the Greenpeace France report of October 2023