The surprising challenges of spending free money

Governments need to consult the private sector to bring about the best in public-private innovation partnerships

This was what Europeans had been dreaming about. The COVID pandemic, with all the misery it brought to millions of people, seemed to provoke an unprecedent response from EU bureaucrats and politicians, one which was markedly different from the response to the 2008 financial crash.

This time, a distinct focus on solidarity and a transition towards a green economy was placed at the core of this policy response, perhaps partly driven by a desire to reinforce the concept of a unified Europe in the wake of the UK’s withdrawal from the EU.

Having now accepted the fact that the EU response to COVID-19 has been fairer, more equal, and perhaps even better planned than that of the financial crash of a decade ago, it now remains to be seen how the rest of the saga will play out. European governments have been hard at work preparing their plans for how to use COVID funds and dreaming up strategies to breathe new life into their economies as Europe prepares for a post-pandemic future, while paving the way for a greener and fairer economy.

However, spending all this money, no matter how many plans a government comes up with, was always going to be technically difficult. These funds, for one matter, must be spent down to the last cent; and though it may seem like a trivial concern, many countries will have their work cut out for them in this regard.

For one, available data already indicates that countries such as Croatia, Italy and Spain have a historically poor record when it comes to spending European funds: they are traditionally only capable of absorbing a fraction, typically less than half, of the money they are allocated. This raises a critical public policy question that is salient in most domestic policy debates in the EU: how much sovereignty are European states surrendering under these circumstances?

The question becomes even more poignant when we factor in Poland and Hungary, two nations governed by right-wing populists and that have been subject to Article 7 proceedings by the European Commission given the erosion of EU values currently taking root there. It is unsurprising that these counties are typically tipped as being the most likely to exit the bloc given their constant antagonism with Brussels and their governments’ increasing resistance to all things European. This has now reached a point where policymakers are rightly concerned about the prospect of the misuse of COVID recovery funds and the risk that they be put to use serving the interests of governments with ulterior motives.

A fundamental challenge surrounding these funds, therefore, is that European values cannot be compromised by their misuse, and it is therefore imperative (as is the case with Poland and Hungary) for the EU to not be afraid to withhold funds whenever these values are compromised or threatened. Faced with the choice of having two increasingly anti-European countries desecrate the values propping up the recovery strategy, the cost of not doing anything about it would be too high a burden.

As for the issue of Simply put, private sector companies cannot access the funds without the public sector, and the public sector will not be able to transform the economy without unlocking the innovation and job-building capacity of the private sector.

Notwithstanding the risks brought about by any misuse of these funds, there is ample opportunity for optimism. The EU strategy has shown a confident and decisive policy response in the European crisis playbook. Across the continent, the European Commission have procured over 600 million doses of COVID-19 vaccine that have been distributed across the bloc, and almost 600 million Europeans have been fully inoculated. This has gone a long way to show that, with the appropriate coordination, Europe is capable of achieving astonishing results.

We are therefore now looking at the prospect of a new Europe, one with a newfound sense of confidence and solidarity that arguably took everyone, even the most convinced Europeanists, by surprise. Against the last years in which the European project was questioned, challenged, and even declared moribund, it has taken the opportunities presented by the pandemic to reignite a common sense of belonging across the continent. This new EU, more aware of the importance of building a more sustainable and diverse future, should never hesitate to reign in those who oppose its fundamental values.