European Public Goods

Michael Thöne, Helena Kreuter

Vision Europe / September 2020 / Paper, FiFo Bertelsmann (publ.)

Abstract
Over the last decade, the European Union has been hit by multiple crises of various kinds. Although the corona-virus pandemic, with its health, social and economic consequences, currently dominates policy perception and action in Europe, it is only the latest in a series of challenges. The EU's limited ability to respond effectively to such challenges has highlighted the need for reform. The project "A strong Europe in a globalized world" propos-es to advance the reform process by means of the concept of European public goods. In the present paper, we provide a definition of this concept and illustrate its potential in the debate on future models for a stronger and more sovereign Europe.
The concept of European public goods draws on the welfare-economic concept of public goods (or common goods). In contrast to private goods, public goods justify the provision of services by the state when at least one of the following forms of market failures occurs: no rivalry between buyers, no exclusion of individual consumers, natural monopoly.
Within a federal system, public goods can be provided by different levels of government. The theory of fiscal fed-eralism offers an economic approach for the allocation of tasks to different government levels of a federal state. Applied to the EU - which is not yet a federal state, but has gone far beyond the confederation of states -, it en-tails that a public good should be provided by the central level if the following criteria are met: Europe-wide benefits, Europe-wide homogeneous preferences among the inhabitants of the Community and most cost-effective realization at the European level due to economies of scale. In this case, we speak of European public goods.
However, the above three criteria could point in opposite directions and, thus, provide no clear-cut argument for or against the Europeanization of a public task. A weighing up decision is then necessary. This could be support-ed, for example, by a cost-benefit analysis, which derives the European added value of a public good by first determining for each criterion the difference between the benefits of the European and national provision, and then aggregating the resulting three "partial net benefits" into an "overall net benefit". Such a procedure meets not only the inherently important requirement of justifying shifts of competence as well as possible, but also the de-mand for political transparency.
The concept of European public goods described here presupposes that, in order to increase the Community's capability to act, the right task priorities must first be set for the respective time and problem context. Today more than ever, it is important that each level of government in Europe takes on the public tasks for which it is best suited. In recent years, the Union's current field of action has been increasingly assessed in the light of the theory of fiscal federalism. An overview of the findings suggests that the EU’s financially relevant action priorities focus too much on regional or even local public goods and too little on European public goods.
A successful implementation of the concept also requires that consideration be given to how to get there. From today's perspective, three aspects in particular are important for the further analysis: (i) the governance issues associated with the catchword "connectivity" arising from the provision of European public goods within a multi-level system; (ii) the creation of new financial leeway for European public goods already within the next multi-annual financial framework 2021-2027; (iii) breaking the alleged taboo of treaty changes.