Beyond Covid-19: Economic crisis management and the future of cohesion policy in the EU

by | Mar 10, 2021 | News

On the 3rd of March, the Equilibrium Institute and the Centre for Euro-Atlantic Integration and Democracy (CEID) organised this year’s first episode of the European Cafe series, which focused on restarting the economy after the pandemic.

Our guests, members of the European Parliament; Enikő Győri from the Fidesz Party, and Victor Negrescu from the Group of Socialists and Democrats, discussed and shared their views on economic crisis management after COVID and the future of the European Union’s cohesion policy.

The COVID-19 pandemic shook our societies and healthcare systems at the core – the economic recession caused by the epidemic significantly surpassed the extent of the 2008 economic crisis. Although Enikő Győri and Victor Negrescu represent politically diverse values, they agreed that the ongoing crisis poses unprecedented challenges for the European Union.

At the inception of the discussion, Ms Győri presented an overview of the European Union’s and Hungary’s status quo, outlining the challenges the EU is facing, arguing that the economic recovery will be slow and gradual. She believes that a quicker vaccination program could be the only catalyst for consolidation. Furthermore, Ms Győri stated that the pandemic caught Europe off-guard, and to avoid similar economic crises in the future, a degree of protectionism has to be guaranteed. Moreover, the economic dependence on external factors is an issue European countries need to re-evaluate.

When discussing the challenges the European Union faces in the present-day international environment, Ms Győri drew our attention to the EU’s current economic and social model. She stated, that according to research, by 2050, the EU’s GDP will be in steep decline. Another factor we must take into account – she pointed out – is the demographic deficit in Europe, which poses a significant challenge to all regions. Europe’s high standard of living is rather questionable at the moment and is in threat unless we manage to move towards a future-oriented social and economic model.

Ms Győri added, that despite the previous contentions, it is positive that the EU member states have learned from the 2008 crisis, and began injecting the economic stimuli in time last year. Fortunately, governments opted for aid packages, loans and grants instead of austerity measures. She believes that these economic crisis management mechanisms will be more effective than the fiscal and monetary policies introduced in 2008. Furthermore, Ms Győri gave us a quick overview of the EU’s 2021-2027 Long Term Budget. The Next Generation EU (NGEU) was added to the long-term framework, which allocates a combination of grants and loans to help facilitate economic consolidation in the aftermath of the recession caused by the pandemic. In the context of the future of cohesion policy, Ms Győri highlighted the importance of infrastructure development, which she believes to be one of the biggest drivers of evolvement in the CEE region. She calls for tighter cooperation in Central and Eastern European and added, that without investment in infrastructure, the region will never overtake the Western countries.

Mr Victor Negrescu continued the discussion by drawing our attention to the importance of cohesion policy, especially in the light of the lack of understanding within the European Union about fund allocations. Cooperation is necessary – he stated – because cohesion funds do not only foster economic convergence but long-term, Europe-wide development. He encouraged modernizing the current cohesion policy, in order for it to show, that the policy can become an active tool in building resilience and facing challenges, by using the right way. In other words, cohesion beneficiaries have to allocate funds with the aim of solving specific issues.

 

Mr Negrescu believes that tighter cooperation in the CEE region is a realistically achievable goal. However – he argued – cohesion beneficiaries are in need of a stronger strategy to reassure the Western European states that their money is well spent in the CEE region. Cohesion policy is well-received in Hungary, Romania and Poland and in the Central-Eastern region – Negrescu explained – but the Western states are wary about the ambiguous utilization of the invested funds. Cohesion has to be depoliticized and not only states, but local stakeholders and NGOs have to start collecting data on the success of the cohesion policy. He believes, that we have to start popularizing and communicating the effectiveness of cohesion policy, so Western states realize that the projects supported by the policy create convergence, and are worth investing in. Moreover, Mr Negrescu stated that the recipients of these grants (CEE countries) have to make clear, that all of Europe benefits if these funds are allocated to them. According to his experience, when cohesion funds are allocated to Romania, often they end up at the hands of multinational companies, meaning that not only Romania but the entire EU benefits from them. He believes in one of the ground principles of the EU, solidarity and hence contends that if these grants are used correctly, economic stabilisation and recovery are realistic goals.

 

Enikő Győri and Viktor Negrescu continued the discussion about the question, whether the pandemic will further exacerbate the inequalities within the EU, and whether the fight for cohesion funds will increase. Ms Győri thinks that catching up is definitely harder for the Central-Eastern region bearing its communist past and its lag behind the West in mind. Nevertheless, it is possible, but it will become significantly harder as the competition for these funds will increase. She said that the COVID-19 pandemic has made the EU even more fragmented, hence the East-West and North-South division is ever so present. To solve this issue – she said – cohesion countries have to remain united and utilise the allocated funds in a future-oriented way, to tend to their immediate needs.

 

Mr Negrescu highlighted the importance of cooperation as well and projected that the tensions between rural and urban areas across the European Union will surface and become a key issue in the coming years.  Furthermore, Mr Negrescu believes that Europe is facing other challenges worth mentioning, such as digital transformation, environmental issues, healthcare, education or the issue of the universal minimum wage.

 

The invited members of the European Parliament – Enikő Győri and Viktor Negrescu do not agree on everything regarding Europe’s future, but they see eye to eye on the fact that the COVID-19 crisis poses a vast challenge to the society, economy, healthcare system and politics of Europe. The recovery will be long but through cooperation – especially regional cooperation – consolidating the recession is not impossible.