Public Goods in a federal Europe

Helena Kreuter, Michael Thöne,

Vision Europe / March 2021 / Policy Brieff, FiFo Bertelsmann Stiftung (publ.)

Abstract:
Europe should become stronger and more sovereign through the provision of more and better European Public Goods (EPGs). The European Union (EU) should take on more of the tasks to which it can lay claimby virtue of its size and function. Europe should become more European. In order to make good this claim, the Union more than likely will have to assume more of the features of a cooperative federal state. Putting the concept of European common goods intopractice requires one to spell outmore clearly the way forward and to knowhow these EPGs can then be set to work. The present paper addresses the following issues: first, the appropriate institutional framework for the introduction and provision of European public goods; second, how best to phase in that provision within the European multi-level system of governance. For this purpose, it uses two analogies. With the first analogy, we ask whether the EU as a sui generis political entity would not be better understood by being explicitly viewed as a co-existence of federal state and confederation. The federal-state-like supra-national model provides a democratically and fiscally appropriate governance framework for the provision of new European public goods but places significant obstacles in the way of their introduction. The opposite is true for the confederation-like intergovernmental model: this is poorly suited for the provision of new European public goods but offers greater prospects for their successful introduction. Such considerations might suggest that additional EPGs are faced with their own "federal paradox". This paradox is not insurmountable but must always be kept in mind. The second analogy compares the EU –especially its federal component– with the German model of cooperative federalism or “administrative federalism”. This comparison brings to the fore the issues and tasks that providing for EPGs involves when the legislative, administrative and financing competences may wellbe and are allocated to different levels of government. It thus helps to understand that many EPGs should not be provided by the EU alone. If one were to consider only the US-American-style federal state model for European federalism, few European common goods could be designed. In vertically cooperative federal states, on the other hand, the legislative, administrative and financing competences for certain public services are not always entrusted to the same level of government. This may entail connectivity problems. Nevertheless, an efficient allocation of tasks is created precisely for the many instancesin which there are no EU administrative bodies locally and none should be contemplated. We develop a criteria matrix that serves as a guide for the tailor-made fiscal-federal design of a wide variety of EPGs. The most important prototypes of the vertical allocation of competences are presented by means of four illustrative scenarios. In fine-tuning such a design, we pay particular attention to the central financing of those European common goodswhich are administered locally by the Member States. This promising model is still quite fresh –and innovative–in federal practice. With a view to the resurgent debate on the future financing of the EU, we also discuss the long-standing and contentious issue of justeretour. This issue symbolically and factually embodies one of the central hurdles that still distinguishes the supranational system of the EU from the "normal" top tier of a federal state. It will therefore only be solved consistently if key revenue instruments politically assigned to the EU are used to finance services with a visible European added value –i.e. genuine European common goods. The innovations in terms of EU taxes and common debt occasioned by Next Generation EU and the EU Recovery Fundopen up additional possibilities here that would hardly have arisen without the great coronavirus crisis acting as an unwished-forcatalyst for European progress.