UEF - Union of European Federalists

The Spinelli Group - This report suggests a way to break the deadlock over the MFF. We recommend restructuring the EU budget into federal and confederal parts. Eurobonds could then be launched without changing the treaty or breaking the balanced budget rule, and at no extra cost to national treasuries. Only if the EU acts federally will it acquire the common fiscal policy it needs to invest in economic recovery.

From public health to constitutional crisis

The European Union is once again in deadlock. The coronavirus pandemic has spawned a new financial crisis. While there was certain to be another financial shock after the crash of 2008, we were unsure of its timing, provenance and symmetry. Nor could we predict the mega scale of the crisis: the collapse of supply and demand, the closure of much of Europe’s business for at least the first half of 2020, and rapidly rising unemployment which could lead to a deep depression.

The European Union is not sufficiently robust to face this crisis with equanimity. The unification project, now 70 years old, is still far from complete. The EU is an integration experiment conducted in real time. There is no precedent for a number of nation-states to engage voluntarily in building a federal union. The emergence of previous federations, notably the USA, postulate analogies but offer no clear roadmap for contemporary Europe.

So the Union today is a hybrid, part federal and part confederal. The federal ambition – “ever closer union” – is not dead, but it no longer commands the allegiance of all its member states or political parties. [1] By way of successive treaty changes and some path-finding jurisprudence of the European Court of Justice, the Union has built up its supranational authority. But most of the EU institutions are still run in an intergovernmental way, by traditional diplomatic methods. Decision making in a confederate Europe is bound to be slow and fractious, leaving the potential of the Union as a whole unfulfilled, and its governance weak.

The spread of the coronavirus pitches the EU into its next constitutional crisis. For the Union is unfinished business, a fragile polity under stress. Debate about “the future of Europe” is uncertain. No settled consensus has formed around the final size and shape of the Union. Indeed, the United Kingdom, one of its major member states, has just seceded. Eurosceptic leaders in Hungary and Poland challenge the premise of the rule of law on which the Union’s claim to legitimacy rests.[2]

The creation of the internal market and single currency are great achievements, but they risk being undermined by the failure of EU leaders to pursue integration to its logical conclusion. The European Central Bank (ECB) has to manage its common monetary policy without the aid of a common fiscal policy run by the Commission. The Bank is expected to stabilise the banking system of the eurozone without having proper oversight of the financial services industry. The fact that the EU has no central fiscal policy to complement the national budgetary policies of euro members has led to much discussion about the creation of a fiscal capacity unique to the eurozone. Nothing has been decided, however, leaving the ECB solely responsible for risk-sharing in the eurozone.

A common fiscal policy, of course, would require the coming into being of a discernibly federal government of the Union. The Commission is designed to act as a proto-government, but it has to share its executive authority in many areas with the Council. Although the Council itself, and its senior partner the European Council, can vote to take decisions, they usually prefer the longer and more difficult route of acting by consensus. In any case, the unanimity rule is still imposed for all critical decisions of a constitutional nature.

In other fields, too, the EU house is only half-built. The elaborate ‘external action service’ has no serious common foreign policy, still less a common defence policy or integrated military forces. The European Parliament does its best to bring democratic accountability to the Union but it is not elected on a transnational basis and does not enjoy federal political parties to connect it with the electorate. There are still too many restrictions on full legislative power for the European Parliament, not least with regard to budgetary matters. National parliaments, meanwhile, cannot act federally even if they wished to do so. Parliamentary influence on the shaping of the general interest of the Union remains weak.

The Union’s latest Treaty of Lisbon (2007) includes provisions that would streamline decision-making in a democratic way, but these lie unused.[3] Nowhere are the internal contradictions of the EU’s structure more exposed than in the regular round of argument over spending money. Every seven years after debilitating negotiations on the Multi-Annual Financial Framework (MFF), which must be decided by unanimity, we sigh and say “never again”.[4] But reform of the system never takes place. Seven years later we are back where we started, with squabbling between the richer and poorer states, frayed tempers and, eventually, sub-optimal results.

What are we arguing about?

The current EU budget runs at €150 billion per year (smaller than that of Belgium) and represents only 2% of the combined spending power of the national budgets of the 27 member states. Like the Union itself, the budget is a hybrid creature, part federal and part confederal. The EU’s capacity to spend and borrow is rigidly constrained by the ceiling of 1.23% GNI imposed in the ‘own resources’ decision of 2014.[5]

Revenue for the budget is mostly supplied on a confederal basis. The larger part of the EU’s income, about 70%, is provided by direct subscriptions from national treasuries based on the GNI of the member state. These fees are supplemented by transferring a tranche of national VAT receipts. The rest of the revenue, about 15%, comes from ‘genuine own resources’ – that is, customs duties, levies and penalty fines accruing directly to the Commission.

Discussions about budgetary reform are perennial. Many good proposals have been made to render the system more transparent, to focus on improving the added value of EU spending, and to skew the budget to meet contemporary political needs (such as scientific research, digitalisation and climate change mitigation) and away from traditional policies in need of reform (notably, agriculture). Worthy objectives of increased fairness, sufficiency and stability are agreed in principle ? then ignored in practice. Democratic accountability is impaired because the European Parliament is denied the right of co-decision over revenue.

No serious structural reform of EU finances has been implemented. Member states are obsessed with the practice of juste retour – what Margaret Thatcher once described, rather rudely, as “getting our money back”. In this situation, where the notion of common good is lost sight of, the debate divides net benefactor creditors from net recipient debtors. Finance ministers of the ‘frugal’ northern states trumpet their refusal to increase transfers to the spendthrift south and east. The principle of solidarity among states and citizens, which imbues the EU treaties, disappears.[6]

Recent efforts to broker agreement in the Council have come to nothing. The European Council has again passed the buck to the Commission, which has been asked to come up with new proposals for the next MFF for 2021-27 in the next weeks. Can they succeed?

Never miss a crisis

Paradoxically, it is fortuitous that the MFF is up for renegotiation bang in the middle of the wider political crisis caused by the pandemic. If the Union cannot rise to the level of this uniquely critical occasion, it will justifiably be treated with scorn.

Recovery from Europe’s economic collapse will require a massive fiscal stimulus over the medium term. In April the EU agreed a package of short-term, small-scale measures to increase credit lines to those states most distressed by the effect of the pandemic. However useful these initiatives prove to be, they are not the stuff of macroeconomic recovery. Indeed, hard-pressed states which accept bail-outs from the European Stability Mechanism (ESM) or loans from the European Investment Bank (EIB) will be saddling themselves with the burden of yet more national debt. Regional imbalances within the eurozone will be accentuated. Spreads are already widening despite the active purchase of Italian and Spanish government bonds by the ECB. It is difficult to see how the Union can avert another banking crisis once the full scale of the economic crash becomes clear.

When it makes its proposals, the Commission should take the opportunity to remind the Council of the federalist principle of subsidiarity. This guides the Union to take action at the Union level “if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States … but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level”.[7] Eurosceptics have long used subsidiarity as an argument against increasing the competences of the EU. Today, federalists must reclaim the principle to argue exactly the opposite.

Self-evidently, an effective response to the pandemic crisis requires a sharing of risk and a pooling of resources at the level of the Union. Where the EU institutions are made responsible for the management of shared risk, decision-making power should be federal and not confederal. Intergovernmental arrangements permit each state, especially the richer and larger states, to wield a veto. That is why confederations are even more difficult to run than federations, where decisions are taken by a democratic majority. The European Union, for its part, has had long experience of working well through the supranational Community method – and somewhat less well intergovernmentally.

The European Council has yet to think federally. At their meeting on 23 April, the leaders descended into a long and inconclusive argument about whether the very limited financial incentives so painfully agreed should take the form of loans or grants. When Commission President von der Leyen argued for the centrality of the EU budget in the rescue package, she implied that the Commission should be empowered to leverage money secured against the joint and several liability of all the member states. That proposal, too, was shot down because it failed to relieve the ‘frugals’ from the risk that the weaker states would default on their commitments.

Federal recovery bonds

Now is the time to oblige the European Council to discuss the merit of installing a level of competent government up above the level of the member states. Seizing the chance for a radical reform of EU finances, the Commission should propose the creation of a special purpose vehicle of a federal eurobond secured not by the member states but by the Union.[8]

The new funds created would not themselves be part of the EU budget, but interest to eurobond-holders would be paid exclusively from that part of the budget based on the genuine own resources. The new MFF would restructure and compartmentalise the budget into two ring-fenced parts. National GNI contributions would be unaffected by the development of the Union’s autonomous fiscal capacity. National treasuries would save money, and the EU’s important balanced budget rule would be maintained.[9]

For this scheme to work, two things have to happen. First, the portion of revenue raised from genuine own resources must be dramatically expanded. The Commission, supported by the European Parliament, has already proposed a number of new sources of revenue. These include a tax on non-recycled plastics, a digital tax, proceeds from the EU’s carbon emission trading scheme and a slice of corporation tax following agreement on a consolidated base. Other ideas, including a tax on financial transactions, are also available. A thorough reform of the VAT system, moreover, would allow a tranche of that tax to be hypothecated directly for EU purposes. Whatever new taxes are introduced, they should be linked to the strategic common policies of the Union. EU citizens must have confidence that their taxes are being spent in a productive and efficient manner.

The second necessary reform entails the lifting of the ceiling of own resources to allow a large-scale eurobond issuance without jeopardising the AAA credit rating of the Union. Ursula von der Leyen spoke of a temporary raising of the headroom to 2% of GNI. However, a permanent ceiling of 2.5% would allow the Union to borrow up to €400 billion per year (€2.8 trillion over the seven year period of the new MFF).[10] That is serious money at the disposal of the EU’s treasury facility.

As to the type of eurobonds, there are two options, the choice of which can be determined by the prevailing market conditions and economic forecasts at the time of their launch:

bonds issued in perpetuity, or ‘consols’, with no date for the redemption of the principal, paying fixed term coupons;
maturing bonds in the form of long-term annuities (up to 30 years), paying variable rates of interest.

Recovery eurobonds promise to be an attractive, low-risk investment for governments, central banks, institutional and private investors. Purchasers would be signalling commercial and political confidence in the stability of the euro and the durability of the Union itself.

How to spend the money

A large-scale EU economic recovery fund would have several objectives. Its central task would be productive investment, especially in projects with a European dimension that could not be financed through normal channels, such as the EIB. Mass vaccination against COVID-19 is the obvious priority. Building Europe’s capacity in 5G is another, before boosting the European R&D effort in 6G and artificial intelligence. Restructuring some business sectors where there will be excess supply, such as aviation, will require EU-wide coordination and support. A new sustainable and future-oriented industrial policy, part funded by the EU, will be a necessary component of keeping the single market up and running.

The Commission’s proposals for the European Green Deal provide a number of avenues for mixed public and private investment, such as energy grids, carbon capture and storage, and modern public transport infrastructure. The EU has important powers to coordinate and supplement member state efforts in education, social care and public health, all of which sectors will require an injection of public investment during the recovery phase. Beyond grants, the Commission should also use its new treasury facility to take equity in private sector firms as stock markets struggle to return to normal levels of activity.

The fund should also be used progressively to replenish the (reformed) ESM with federal money as the new reality of a fiscally-empowered Union takes shape. Macroeconomic stabilization is a federal function. The launch of a federal eurobond will put an end to the argument over creating a dedicated fiscal capacity for the eurozone. It will also settle the otherwise intractable MFF negotiations.

Future fiscal union

The initiatives we recommend here can be undertaken quickly and without EU treaty change. In the long run, however, fully mutualized debt security as a permanent fixture of an EU fiscal union will need the legal certainty that can only be provided by a formal shift of competence from the national to European level. Ultimately, a ‘sovereign’ Union means treaty change. The EU’s constitutional courts, led by the European Court of Justice, will tolerate nothing less.

In the meantime, however, and for the foreseeable future, the special purpose vehicle of the eurobond recovery fund is the simplest and most straightforward solution to Europe’s immediate and acute crisis. We urge the Union to act.

ANDREW DUFF

BRANDO BENIFEI

GABRIELE BISCHOFF

DAMIAN BOESELAGER

PASCAL DURAND

DANIEL FREUND

SVEN GIEGOLD

SANDRO GOZI

DIMITRIOS PAPADIMOULIS

DOMÈNEC RUIZ DEVESA

HELMUT SCHOLZ

GUY VERHOFSTADT

28 April 2020

Download here the Report "A Federal Europe: the way out of the crisis"

[1] Article 1 TEU.

[2] Article 2 TEU.

[3] Notably, Article 48(7) TEU.

[4] Article 312 TFEU.

[5] Article 311 TFEU.

[6] See particularly Article 2 TEU and Articles 122 and 222 TFEU.

[7] Article 5(3) TEU.

[8] On the legal basis of Article 352 TFEU, the ‘flexibility clause’.

[9] Article 310(1) TFEU.

[10] In 1929, the US federal budget was raised to 3% of GNP. By 1944 it had reached 40%.

Ahead of the fourth summit dedicated to the response to the coronavirus pandemic, Sandro Gozi insists on the need to "renew the European project".

What do you expect from this meeting of Heads of State and Government?

I would like the Heads of State and Government to immediately announce a recovery fund of at least EUR 1000 billion, so that tomorrow's world begins today! But I am afraid that the reality is quite different and that the debates will continue for a while.

Can the Dutch and Italians, whose points of view are on the opposite, come closer together?

Yes, I think so. But both Rome and The Hague are still prisoners of the past ideological debates, namely the mutualisation of the debt for the Netherlands and the activation of the European Stability Mechanism (ESM) for Italy, even though this time there is no question of austerity… The whole issue is to push each other to free themselves from these outdated shackles.

Could this crisis reconcile politics and the economy?

This crisis must put the economy at the service of recovery and reaffirm the primacy of politics. During the financial crisis, the economy had the priority. This time, the need to renew the European project and move towards a sovereign Europe must have the priority over economic obstacles.

What weakness does this crisis highlight in Europe?

It has highlighted the fact that Europe was conceived as an association of States thought only from the point of view of utility. Today, we must move towards a Europe thought as a community of peoples in solidarity. If Europe's response is up to the task, we will be able to create what has always been lacking: an emotional bond between Europeans and Europe.

Will the European project be stronger or weaker?

It will depend on the courage of the EU. Ursula von der Leyen has said that we must live up to Altiero Spinelli. However, I did not see federalist actions by the Commission’s President. A "new" Europe is necessary, but its realisation will depend on its ability to resist the temptation of business as usual. Confronting the coronavirus and the future, Europe must avoid minimalist solutions.

The European Union has been slow to respond to the crisis. Will it do better for recovery?

That is the whole question. I distinguish three phases in Europe's response. The first - catastrophic - during which the crisis was underestimated. The second, when measures unthinkable before - the flexibilization of State aid or the suspension of the Stability and Growth Pact - were taken. We are entering the third phase of reconstruction with many questions: will the leaders take the measure of the emergency? This is not the time to make cheap compromises. We need tough political confrontations in order to take ambitious decisions.

Do you think this crisis will restore Europe's health sovereignty?

Europe is dependent on China. French, German, and Italian companies have relocated their production - especially of medicines - to China. Europe must therefore recover its industrial sovereignty, and this will not go without rethinking its economic model.

Will the crisis overshadow the EU's goal of carbon neutrality?

In the immediate term, the urgency is to intervene in all sectors to prevent company closings, increased unemployment, and poverty. But then, the recovery must follow a sustainable path and be based on the "green pact" put on the table by the European Commission last December.

There are calls for the conference on the Future of Europe to start as soon as possible. Is this the priority?

It must start after the summer! In order to project ourselves into the world of tomorrow, we need to start an in-depth reform of the EU. This must be the object of this exercise, which is even more justified from the moment that we must rethink the way we live together.

Has the relationship between citizens and Europe been changed by this unprecedented crisis?

Initially, a feeling of rage and disenchantment prevailed. Because of its initial mistakes, the EU started the marathon late, when its competitors had already covered 10 kilometres. As a marathon runner, I know that if we go fast and are efficient, we can win back hearts, not only in Italy but also in France. Of course, there is a risk that most citizens will turn their backs on Europe, but if Europe succeeds in its post-crisis revival, an unprecedented feeling of belonging could prevail.

Original interview: here

The size of the crisis triggered by the pandemic forces our country and Europe to rethink themselves in order to try to understand how to strengthen their political capacity so that it can be commensurate with the current challenge.

It will not only be the mourning, the many deaths and too much pain that will mark our public and private lives; nor will the problem be restricted to the economy, bent by exceptional circumstances, and to its social consequences. The very mentality of the Western world will have to change in order to confront the tragic aspect of history, which has once again become evident in all its harshness.

How the new Western vision of the future will be built is a game that will be played first and foremost in Europe. It is here that the start of a new, true supranational policy can be built, forging the alternative to the false answers offered by nationalism that would bring back the clock of history to the dynamics of totalitarianism in the 20th century. The political, social, cultural and moral values of our civilization are at stake.

Italy must face with this spirit and this sense of responsibility next European appointments and commitments, starting from the European Council of 23 April.

At the plenary session of the European Parliament on 16 April, President of the European Commission, Ursula von der Leyen, wanted to quote the Ventotene Manifesto to underline the exceptional nature of the moment and the ambition of the response that the European Union must be able to give. Altiero Spinelli and Ernesto Rossi are Italy's heritage, and that is also why it is up to Italy, if it so wishes, to indicate how to turn the words of the Manifesto into concrete actions.

The European Union in these weeks is discussing – and finding – immediate and exceptional responses to support the Member States facing the health, economic and social emergency. The European Council, on 23 April, will have to finalise the package of measures and instruments agreed by the Eurogroup for this purpose, and Italy must be aware that it has achieved a great victory, pushing the EU to change its mentality and approach, in particular with regard to the European Stability Mechanism.

Within this framework, the debate on the Recovery Fund, on which the European Council must agree to make it operational as early as the next few months, must distinguish between the need for its launch as an emergency instrument to provide immediate liquidity to States, and its development as the backbone of the European reconstruction strategy, which is intertwined with the launch of the European Green Deal.

Emergency can be tackled by simply making the best use of the possibilities offered by existing instruments. Reconstruction, conversely, requires the boldness of innovation.

A major European reconstruction plan that also responds to the need to affirm a revolutionary new economic model, strong in technologically advanced and ecologically innovative sectors, cannot be achieved with the instruments provided for today by the Treaties. It requires:

– a new capacity for European political action, no longer limited to the coordination of national policies, but based on the principle of subsidiarity, to be able to act directly at supranational level where political action needs this dimension;

– substantial resources and a new approach.

In this sense, while we welcome the proposals for a substantial increase in the ceiling and resources to be allocated to the new Multiannual Financial Framework, we cannot fail to note the limits of this approach, which ultimately leaves national budgets and parliaments, together with governments, responsible for collecting resources and implementing policies. Not only is the decision-making system cumbersome and bent on the need to always find a compromise between the different demands and visions of the Member States; not only is EU action itself severely limited; but above all, ambitions are diminished by this approach, starting from the inadequacy of the resources that (with such difficulty) can be allocated to the European budget, even if it will be doubled.

The need, in this new phase, to think as well about the creation of a common European debt clearly highlights the limits of the current system. We recall, among many on this point, the remarks by Lorenzo Bini Smaghi: "There are no European activities today nor European capacity to generate autonomous fiscal revenues that can be used to guarantee European public debt…. To issue Eurobonds, the EU must be able to generate new tax revenues… (i.e. have) a direct tax authority over the European economy and European citizens".

The Multiannual Financial Framework, with the current institutional limitations that determine its decision-making mechanisms, can never become an adequate European guarantee for a common debt; nor will it be able to give the European Parliament and the Commission the possibility to increase their revenues, indispensable in the face of the political ambitions that should be put in place. Nor will it ever be possible to go beyond the current governance model, which is based on the coordination of national policies and which does not provide for a European political level capable of acting autonomously and therefore effectively.

The size of the challenge we are facing today – if we really want to give an adequate common response, while at the same time creating the conditions to make Europe a leading player on the world stage in the coming decades – really forces us to return to the spirit of Ventotene evoked in Strasbourg by President von der Leyen, and “to think the unthinkable”, as French President Macron reminded us from the pages of the Financial Times: “Today is the moment of truth. We must decide whether the European Union is a political project or just a market”.

The real choice for Europe today, therefore, is whether to really become a community of destiny. It is a choice that involves the federal shift to a decisive point left unresolved for decades. Italy should propose that a targeted revision of the Treaties be immediately put in place in order to create fiscal competence at European level. Rally the other countries that share the ambition of a Europe capable of acting in the new world and seek the support of the Community institutions, starting from the European Parliament, which should feel called upon to take up the legacy of Altiero Spinelli.

If there were the political will, a few months would be enough to carry out the reform and get to the start of the new Financial Framework, having created the conditions for a federal budget line, fuelled by European taxes decided by the European Parliament instead of 27 divided Member States, which would represent the necessary basis for issuing debt with a federal guarantee. A revolution that would pave the way for a real constitutional transition, relaunching on a solid basis the process of confrontation on the future of Europe.

Italy has the interest and the vision to promote this change of pace. Only in this way can the sterile polemics be wiped out in one fell swoop and a new phase can be opened to give our country back the historical role it deserves.

Milan, 17th April 2020

Luisa Trumellini, National Secretary of MFE

Bruno Tabacci, Camera dei Deputati

Tommaso Nannicini, Senato della Repubblica

Download the Memorandum of Movimento Federalista Europeo (UEF section in Italy)

Read the original version in Italian.

The European Federalists welcome the resolution approved today by the European Parliament with a set of proposals for the European Union to address with united and determined actions the COVID-19 crisis and its immense economic and social impact. The European Parliament’s proposals significantly raise the level of ambition of the deal proposed by the Eurogroup last week, in particular with respect to the creation of a new Recovery Fund funded by European Recovery Bonds issued by the European Union and guaranteed by the EU budget to support the European economy and cohesion among member states and citizens. The European Parliament is showing leadership in supporting an ambitious deal by the European Council next week. We now expect the same leadership from President von der Leyen - who yesterday said that in this time of important choices she takes inspiration from Altiero Spinelli, one of the founders of the federalist movement - and from the leaders in the European Council. At the same time, the European Parliament should open a reflection on how to move from addressing the emergency to reshaping the European Union in a way that it has the means and powers to stand future crisis.

Sandro Gozi, President of the Union of European Federalists, stated: “The Recovery Fund is a new crucial tool to enable the European Union to help re-building our economies devastated by the crisis. The European Recovery Bonds, issued by the European Union, as proposed by the European Parliament today, are the only way to make available fresh resources of the size that the US and China are deploying for their economies. We trust that the European Council next week will adopt these proposals and make the Fund and the Recovery Bonds operational as soon as possible. At the same time, we need to reflect seriously on the European Union itself. President Macron is right: the European Union can’t keep moving from crisis to crisis, every time inventing new European instruments, often after bitter divisions among national governments that reverberate through our societies. We need structural solutions that make the European Union able to act fast, to mobilize its own resources rapidly when they are needed for European actions, and without burdening member states, as in every federal structure: European funds, for European common goods, managed by the European level. His call in the interview on the Financial Times yesterday must be taken up by the EU member states and all EU institutions, starting from the European Parliament: we really must address the future of the European project “thinking the unthinkable”.

It is time to address the knot of the European Union as a true political union, breaking taboos that have blocked further European integration in the past decade. The European Parliament should take the lead proposing to revitalize the project of a Conference on the Future of Europe and fast track its outcome to produce a new constitutional pact for a federal Europe with its own financial autonomy.

Brussels, Friday 17th April 2020

EDITOR’S NOTE:

The Union of European Federalists (UEF) is a pan-European, non-governmental political organisation dedicated to the promotion of European political unity. For more than 70 years UEF has been a leading voice in the promotion of European unity and an early campaigner for key milestones in the development of the European Communities and then the European Union. With 25 national sections and over 400 local groups across Europe, UEF promotes a federal Europe among citizens and political representatives at all levels of government.

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The agreement reached yesterday evening by the Eurogroup on a set of financial measures to support EU member states in the fight against COVID 19 and its immense economic and social impact - and particularly the agreement on a new “recovery Fund” to support European economy and cohesion among member states and citizens - marks a welcome turn in the response of the European Union to the crisis, after many weeks of dis-alignment among member states. We welcome that those member states most reluctant towards European solidarity tools have moved their position and made a deal possible.

Sandro GOZI, President of the Union of European Federalists and Member of the European Parliament, declared: "The framework of the deal is positive. I believe that the most important decision is the creation of the new “recovery Fund” to help European economy rebound from the economic impact of COVID as fast as possible, even if the key features of the Fund are still undefined. EU leaders next week can take a bold decision and make the Fund a really transformative instrument for the future of the European Union, if they decide that the Fund can finance itself in the market issuing “recovery bonds”, guaranteed by the European Union itself, if necessary together with member states. That said, the Eurogroup should have reached a deal much earlier and without the display of disunity of the past weeks, which was not positive for the European Union’s image among European citizens. It is just the last evidence of the flaws of the Eurogroup, an inefficient and intransparent body, with a great power that should be moved to the proper institutions of the European Union”.

The "recovery Fund” complements a new European Re-Insurance Mechanism (SURE) to support national measures to face the raise of unemployment, the deployment of the European Investment Bank in support of businesses across Europe, and a limited but unconditional use of the European Stability Mechanism credit lines, for a total close to 600 billion Euros, which add to the already ongoing crucial actions by the European Central Bank supporting member states’ debt issuance to face the crisis.

The European Federalists urge the European Parliament to support increasing the level of ambition of the deal reached by the Eurogroup with respect to the “recovery Fund” in its plenary debate next week in preparation of the European Council and urges the Heads of State and Government to finalize an ambitious deal that can become effective already in the coming weeks.

Brussels, Friday 10th April 2020

The news of the resignation of Professor Ferrari from the European Research Council’s Presidency, motivated by the fact that he has been «extremely disappointed by the European response to Covid-19, for what pertains to the complete absence of coordination on health care policies among member states, the recurrent opposition to cohesive financial support initiatives, the pervasive one-sided border closures, and the marginal scale of synergistic scientific initiatives» are a troubling development in these already challenging times.

Notwithstanding the dispute behind the real reasons for the resignation, we agree with Professor Ferrari that «this is not the time for scientific governance to worry excessively about the subtleties of the distinctions between Bottom-Up versus Top-Down research, or whether all scientific sectors would benefit similarly from a broad initiative on Covid-19.»

Covid-19, just like a war, is forcing innovation on a scale and at a pace that no government would normally contemplate. What was previously unthinkable is happening. The development of a vaccine, which is ultimately the only hope to overcome the current crisis for good, can be speeded up if and only if faster approval for clinical trials, ethical and regulatory reviews, etc. is granted, and unprecedented ways to make massive quantities of a vaccine quickly, such as building dedicated manufacturing facilities are implemented.

The President of the UEF Sandro Gozi declared: «These are indeed extraordinary times when doctors all over the world are faced with terrible decisions about who shall die and who shall be saved. COVID-19 is a global threat that requires a global response. We have advocated the urgent creation of a European research consortium to work together as a team to find a vaccine as quickly as possible. EU funding allocated to different research projects is a welcome move, but there is significant added-value in developing joint EU efforts rather than national parallel ones. The contribution of Europe’s best scientists to this response is paramount. Unprecedented levels of cooperation with their counterparts in the US, China, and the rest of the world will be essential. Professor Ferrari decided to move from the US to Europe to join the ERC, motivated by the great reputation of the agency in funding the elites of excellence in the sciences in Europe and the world. He would have certainly been instrumental in favoring a strong European initiative to fight the COVID-19 epidemics as well as the needed levels of international cooperation with the scientific communities in the US and the rest of the world. His resignation, and especially its motivations, are very sad news in already troubling times. The fact that he plans now to set up an international research initiative to fight Covid-19 from the US is a defeat for Europe’s ambitions to be a global powerhouse of scientific and technological innovation».

Europe needs to choose now: either it gives itself the political and economic means to fast-track the adoption of extraordinary measures, or it will succumb to increasingly unstoppable conflicts between institutions and member states.

The global public health crisis that we are experiencing due to the threat of COVID-19 has been shown in all its severity as the greatest threat to Europe since the Second World War, just 70 years after the Schuman Declaration. Our way of life, our sense of peace and security as advanced and welfare societies is being put at risk by the uncertainty that the virus is causing at the health level and by the consequent economic standstill and increase in unemployment. As in 1950, our ambition must be equal to the challenges (and threats) of the present time.

Once again, as happened in the great financial and economic crisis that began in the summer of 2007, it is clear that nation states alone are not a sufficient governance dimension to face a challenge of these proportions.

In this context, the Commission and the European Parliament have not (entirely) stopped, while the Council has been hindered by the division between countries that are more fiscally sound (and less affected by the virus) and the others. On 26 March 2020 the plenary of the European Parliament met, for the first time in its history without the physical presence of most of the MEPs, to approve the first measures presented by the European Commission to tackle this crisis. Three issues in particular were on the agenda and received an overwhelming majority for their implementation.

The regulation on the allocation of slots at EU airports was amended. This measure seeks greater flexibility in the obligations of airlines in the use of slots at airports. This measure will temporarily prevent ghost flights by avoiding a major impact on the aviation sector which is being hit hard by this crisis.

A regulation was approved to support Member States and citizens in the fight against the coronavirus. Thanks to this measure, 37 billion euros will be made available from Community funds to combat the consequences of the pandemic and to provide health systems, job markets and small and medium-sized enterprises with more and better resources.

Finally, Parliament approved a modification of the European Union Solidarity Fund to include in its scope of action, apart from natural disasters such as earthquakes or floods, risks and emergencies linked to public health, putting at the moment 800 million euros in this year 2020 to support health care.

The Commission has also set up a central purchasing office for healthcare equipment, applied the flexibility in the Stability and Growth Pact, and authorised state aid to companies. These measures are certainly to be welcomed, and therefore supported. Many more resources are needed, however, to compensate for the brutal fall in income and revenue that businesses and workers, including the self-employed, have to face, with the consequent increase in the debt of the States.

The Group of the Party of European Socialists and Democrats in the European Parliament is preparing a common political position that will provide the necessary European and social response to this crisis, and which already includes the issue of Community public debt, backed by the Community budget, which will make it possible to finance a large-scale European investment plan.

The European Commission is proposing a system of loans to finance temporary redundancy programmes, the capital of which would be raised through an issue of European public debt, backed by national guarantees. This would make it possible to obtain some 100 billion euros, but no more, given the limit imposed by the current Multiannual Financial Framework (MFF), when we need no less than one trillion. It must also be possible to attract funding from the European Stability Mechanism without conditionality. But the MEDE can now provide some EUR 400 billion.

It is therefore necessary, in the short term, to set up an Economic Recovery Fund outside the (temporary) Community budget but managed by the Commission, which will make it possible to mobilise debt of the order of magnitude mentioned above, backed by new own resources, such as the border C02 tax, the tax on financial transactions, the tax on plastic, the digital tax, a fraction of the common consolidated corporate tax base, and the profits of the European Central Bank.

Over the medium term, the expenditure ceiling of the MFF needs to be raised considerably, especially taking into account the arithmetical effect of the fall in nominal GDP in this year and next (at least), so that sufficient EU debt issuance can be counted. For the time being, the 1.3 proposed by Parliament will fall short of this. The Commission should rapidly propose a new MFF with a significantly higher threshold than the current 1.1 per cent. On the other hand, debt, as it provides the Union with financial means, should also be officially included in the list of own resources.

Finally, the capital of the European Investment Bank should be increased, and it should be proposed that the European Central Bank transfer money directly not only to the banks, but also to households in the Eurozone, to ensure that no person is left without support, and to relaunch consumption when confinement is over.

At the plenary session on 16 and 17 April 2020, the European Parliament will vote on a comprehensive resolution on the response to the coronavirus in which pro-European and socialist approaches must be strengthened. From the health point of view, it is necessary to take advantage of the tools already available in the Treaties, such as Article 168.5 of the TFEU, which provides for Parliament and the Council, through the ordinary legislative procedure, to adopt rules to adopt support measures against pests and health threats affecting several Member States.

In a question submitted to the European Commission on 3 April 2020, I, together with César Luena and Javi López, called on the Commission to act in accordance with this article, as it provides a legal basis for launching the European Health Union, thereby improving coordination between the various European health systems and the necessary investment in health equipment. But this is only the beginning. It is clear that public health must be a shared competence between the Union and the Member States. The Union must have the power to impose, in a harmonised manner, hygiene, health and social distancing measures in the event of pandemics, such as those adopted by certain Member States in a unilateral and uncoordinated manner. In this context, it is also necessary to postpone the United Kingdom's departure from the European Union, extending the transition period until 2022.

However, it is necessary to go beyond the health and economic emergency, to include the necessary institutional reforms. This includes a reform of the Treaties that contemplates the constitutionalization of the Social Pillar (to which the Health Union is a party), the Green Pact (fundamental for restoring the environment, which also causes the appearance of new viruses), the establishment of some own resources, and the completion of the euro, together with the end of the paralyzing unanimity in the Council (lethal in emergencies such as the current one: e.g., the failed European Council of February 26, 2020), and the extension of co-decision with the Parliament.

All our energies as representatives of European citizens must be focused on supporting emergency measures and on solidarity with our fellow citizens who are suffering and facing the coronavirus. At the same time, it is imperative to turn this crisis into an opportunity to relaunch Europe's political integration, so that we can become stronger in the future in the face of all kinds of threats to our security, including those of a public health nature, but also those of a geopolitical nature.

On 9 May 2020, an Interinstitutional Declaration must be signed by Parliament, the Commission and the Council, launching the Conference on the Future of Europe, which must serve as a catalyst for the Convention and the Intergovernmental Conference. The final result cannot be anything other than a new federal constitutional pact.

Brussels, 8 April 2020

Domènec Ruiz Devesa

Socialist Group spokesperson in the European Parliament's Committee on Constitutional Affairs

Member of the Federal Committee of the Union of European Federalists and of the CFEME Commission

The original version of this article was published in Spanish on the website of Movimiento Europeo (08/04/2020)

The Netherlands does not understand. Angela Merkel should read De Gasperi again. Urgent measures for €1500 billion are needed, “European Recovery Bonds” included. Without an agreement, a group of member states could go forward anyhow.

“The definitive agreement will come if Heads of State and Government will find it. In the meantime, making progress in the Eurogroup is essential”. On the phone from Paris, MEP Sandro Gozi condemns those national governments opposed to an agreement. For weeks Gozi has been stressing the urgency to adopt so-called European Recovery Bonds, and with determination he was also able to bring together his liberal democrat group Renew Europe on this line “We need to find an agreement in three months, rather than three years - he said -, guaranteeing additional solidarity to those States that are more in difficulty, as Spain and Italy, and working on the after-crisis, when the EU will have to rebuild its own industrial sovereignty, starting from the pharmaceutical industry, in order not to be dependent on global actors such as China”.

The exhausting night marathon was not enough, and today the Eurogroup will meet again….The problem is that this is an old debate.

Which means?
Dutch, Finnish and Austrians think as we were in the “before Corona” world. But there is no more such European and international framework, because the Coronavirus emergency has redefined scenarios and needs for eveyrbody.

French Minister Le Marie thinks that failure is “unthinkable”. Do you agree with him?
Yes, it would have devastating consequences. It could blow up the whole Single Market, because if you don't give all member states access to a Fund on equale and fair terms, inequality will explode. Let me explain: if Germany is able to give, as helicopter money, €50 billion to its companies in crisis, how many other states can do it? Moreover, in the new world that the pandemic is shaping up, one instrument will not be enough, but many instruments acting in concert will be needed.

Which ones?
All those under discussion: an ESM without macroeconomic conditions and with simplified procedures, an EIB with increased investment capacity, the ECB, which is already operating in derogation of its quotas to purchase national bonds, since it has purchased €12 billion of Italian securities and only €2 billion of the German ones; and also a fund for Recovery Bonds. Putting it all together, Europe must be able to mobilize resources of €1500 billion.

How do you rate the opening of Berlin?
It seems to me that there is a rapprochement with the French proposal. But the statements of Finance Minister Olaf Scholz are not enough. I remember that Alcide De Gasperi used to say: Europe needs a sense of urgency and foresight. Never as now, Chancellor Angela Merkel should read again De Gasperi and, instead of acting as a Mutti for her 'German constituency', she should aim high, coming close to Macron’s positions and showing European generosity.

Are you confident that Germany will move?
With France, Italy and Spain in tune, I think there is a chance to convince Germany. And if so, we could get a yes from the whole eurozone, including the Netherlands.

What if they still hesitate?
If there is no unanimity, I think a group of countries should go ahead anyway, starting the recovery bonds with those who are in. Of course, it's not the best way. But, if necessary, it will have to be done.

English translation of an article in Italian

"Further joint initiatives are essential, overcoming old schemes that way."

Sergio Mattarella

In the darkest hour the European Union should regain the spirit of the Founding Fathers.

The exceptional circumstances that Europe is going through require rapid, effective but also forward-looking responses proportionate to the dangers that threaten us: not only the pandemic, but also the return of nationalism. If we cannot defeat both these dangers, the European project will be lost.

Despite the efforts of the European Union institutions - which have put in place exceptional measures and substantial resources, and are preparing other important initiatives - the events of the past few days show that the European Union is still held in a weak position by the Member States, which keep the monopoly on political decisions in their hands. This is why the EU does not have the instruments to give a unified response in the health emergency and does not have the indispensable instruments of solidarity between citizens that characterise every real political community. This is how the virus of nationalism spreads.

This weakness can be lethal. It can only be overcome by putting the federal project back at the centre of the debate, recognising that Europe is a community of destiny. The solution is to overturn the relationship between the Member States and the Union, taking away from the former the monopoly on political action, first and foremost in the sphere of solidarity; and giving the European Union the task and instruments to act directly, including in this field.

Today, Europe needs to deploy all its resources to provide a common response to the crisis by launching a major European recovery plan. With this in mind, the question of launching common debt issuance (Eurobonds) as soon as possible becomes impossible to avoid. There is, however, no European institution capable of fully guaranteeing such issuance. Today, the common debt could only ultimately be guaranteed by national budgets. That is also why, within the Union, talking about European debt provokes conflicting reactions; that is why we cannot talk about solidarity between citizens, but only between states.

In order to create the solidarity between citizens that is needed to meet common challenges, it is then necessary to address the problem of a European federal fiscal power. That is to say, we need to create an autonomous EU fiscal capacity which can be enforced directly (without the mediation of the Member States) on the European economy and European citizens, to feed a federal budget and provide European public goods. Obviously, this implies raising the issue of a revision of the Treaties, as this would be a question of giving the European Union fiscal competence. The European Parliament, with the Commission, should be given the power to decide autonomously how to raise own resources and also to manage European debt issuance autonomously, offering a European guarantee to free themselves from national budgets.

Fiscal competence should also go hand in hand with the extension of competences and the allocation of new, exclusive or shared competences in areas and policies that require a European framework (respecting the correct application of the subsidiarity principle), such as certain aspects of health and welfare policies, or industrial policy, research and innovation, immigration and the environment, together with defence. In this way, the European Union would effectively become capable of putting in place a major recovery plan by reinforcing those policy areas that cannot be fully developed at national level alone and would thus provide concrete responses to citizens' needs and expectations.

Including in the current debate the relaunch of the European unification process, with a clear and concrete federalist proposal aimed at providing structural responses to the problem that seems most urgent at the moment, is also an indispensable contribution to support and guide the negotiations on the Multiannual Financial Framework, in which we see too often the wall against wall of national governments because the proposals are weighed on the basis not of collective benefit, but of the cost to their own country. Instead, the negotiations must be relaunched with urgency and ambition, in order to increase their capacity even beyond the 1.3% requested by the European Parliament, exploiting all possible options under existing treaties.

In addition, open the process to create a first nucleus of federal political power, already while the emergency is being tackled, is also the only possibility to resume as soon as possible the path outlined by the Conference on the future of Europe, and to transform it into a real constituent process leading to a federal constitutional pact.

We therefore appeal to all democratic forces convinced that there is no future for any Member State outside the European Union; to the leaders of governments who are trying to find the best means of acting together as Europeans, at this dramatic time; to the European Parliament, as the only institution directly elected by the citizens of Europe, and to every MEP, to support this proposal, the only one that can give the European Union the basis for a stronger start after this crisis.

As the President of the Italian Republic Mattarella said, "Further joint initiatives are essential, overcoming old patterns that are now outside the reality of the dramatic conditions in which our continent finds itself". The future of the very idea of Europe is at stake. The next choices will irreversibly determine our destiny. Today, or never, is the time to resume the path indicated by the Founding Fathers to make all citizens feel that we are a community of destiny.

Statement by the National Board of the Movimento Federalista Europeo (UEF section in Italy): read the original version in Italian.

10 proposals by the European Federalists

The last weeks have seen the Coronavirus crisis spreading throughout Europe, which has become the world epicentre of the pandemic. Europeans are facing, together, the most severe crisis since the Second World War.

The Union of European Federalists welcomes the measures taken by the European Commission establishing a coronavirus response team and an investment fund as well as expanding the scope of the solidarity fund to support some immediate actions for the crisis. We welcome also the decision of the European Central Bank to set up a new Pandemic Emergency Purchase Program to protect the integrity of the Eurozone and support member states in need to increase their indebtedness to face the crisis. The solidarity shown across European regions to share the care of some severely ill patients is also welcome sign of European cohesion.

At the same time, the Coronavirus crisis made clear that the European Union has no competence on health care, while it has only a support competence in public health, and that it is neither equipped with the necessary instruments to ensure an effective coordination for such typically transnational emergencies. Therefore, Member States remain exclusively competent for the management of their health care systems as well as for the management of the economic and social consequences of the epidemic. Without surprise, the Coronavirus crisis management by the national governments confirms once more the ineffectiveness and the limits of the inter-governmentalism. Lacking a European government with adequate European instruments, national governments are left to protect their own citizens and interests as they can. The result is that today our countries are overwhelmed.

The Union of European Federalists regrets that this prevents, in particular, the Union from giving an effective and coordinated response to the Coronavirus threat and replying to the EU Charter obligation of providing a high level of Human health protection to all EU citizens and people living in the EU. The Union of European Federalists regrets moreover the lack of solidarity amongst Member States as called for by Robert Schuman 70 years ago in his declaration of 9 May 1950.

For these reasons, the Union of European Federalists calls for the following urgent and longer term measures:

It is essential to ensure the unity of the European Union and its internal market. We should reverse, as soon as possible, all decisions to reintroduce internal border restrictions between Schengen countries, which do not help stopping the virus since outbreaks are regional rather than national but risk jeopardizing the smooth functioning of services, such as food provision and health care, that are all the more essential in this moment. The unity of the internal market, as well as the free movement of people and goods, especially relevant in cross-border regions, must be ensured. That’s why only the necessary and well proportional measures shall be taken for the temporary restrictions of people and goods mobility at the EU external borders;
The European Commission should also be given the power to issue rules applicable across the EU on measures to be applied by member states to combat the virus;
A European research consortium should be set to work together as a team to find a vaccine as quickly as possible. EU funding allocated to different research projects is a welcome move, but there is significant added-value in developing joint EU efforts rather than national parallel ones;
The Eurozone should immediately adopt a series of extraordinary and coordinated fiscal measures to mitigate the effects of the current crisis and its consequences on the European economy. The ECB’s government bond buying programme is an essential move but it will not be enough to keep borrowing costs for the most affected member states within tolerable levels. If there has ever been a time for a European response to avoid another long recession, this is it;
The Eurozone must now quickly advance to introduce real European bonds, raising affordable new capital to address the immediate spending need of the European Union and member states to contract the crisis. This could take the form of European Recovery Bonds to be issued by the European Union itself to finance an EU-wide plan to promote EU economic recovery and social cohesion during and after the emergency;
The scope of the European Stability Mechanism should be enlarged to finance the immediate strengthening of the European and national health systems to cope with the health and environmental crisis, which threaten the lives of European citizens, and thus also the economic and financial stability of the EU. The Eurogroup must activate ESM’s support for all affected member states without attaching additional conditionality to it;
The Council should immediately approve a sufficient Multi-annual Financial Framework increasing the budget to at least 1,3% of the EU GDP, as requested by the European Parliament, plus any resources raised through the European Recovery Bonds, and allowing more flexibility, in particular to make it possible to launch a comprehensive European anti-crisis spending plan;

In the longer term

The EU should be provided with fiscal autonomy at European level based on the right to directly raise and spend its own resources – such as the carbon tax, the digital tax or the financial transaction tax. Such fiscal capacity will allow to finance a proper EU budget and efficient European policies starting with the research, industrial and environmental policies, which are proving even more necessary in the context of this crisis. It would also enable the issuance of real European bonds without need of national guarantees by member states;
The EU should be entrusted with real competences in the field of public health which should be a shared competence between the EU and its Member States. As a matter of priority, the EU should start setting the basic rules of a EU policy in the areas of public health, and even possibly health care delivery, so as to provide the Commission with powers to coordinate the response to future epidemics among others and develop strong mechanisms for responding to public health emergencies, as any federal government should do;
The planned Conference on the future of Europe should be turned into a fully-fledged European Convention to draft a new Constitutional Pact to answer current and future European challenges.

We should acknowledge that the world after COVID-19 will not be the same as before. Europeans need to pursue a true eco-social market economy, that makes our society more resilient, strengthening the link between the environment and economic growth, as well as acknowledging the importance that a greener and sustainable economy could have in future crisis of the same nature. Without a systematic integration of ecological factors, neither economic competitiveness nor social justice can be achieved in the long run.

The EU and its member states are going through a decisive test, of effectiveness and solidarity, which will profoundly affect the perception that citizens have of our Union for a long time to come.

This crisis is showing that we need strong and resilient local communities. However, some challenges we are facing today – as this crisis demonstrates – can neither be met at local nor at regional or national level. They require a European response, following the principle of subsidiarity. Federalism is the only institutional system that can provide both subsidiarity and substitution.

All at once, the Coronavirus crisis is an opportunity to address the shortcomings of the Union. We must urgently leverage on the lessons learned during the management of the Great Recession of 2008-2018, when the citizens paid dearly for the lack of solidarity at European level, and develop a European answer to the Coronavirus threat and its economic and social impact to transform the European Union into a federal Union that is a community of solidarity with a shared destiny.