Welcome to Better Europe’s weekly update on EU Affairs.
THE CLEAN INDUSTRIAL DEAL: A PROCUREMENT POWER PLAY?
A leak reveals that Brussels is about to rewrite the rulebook on public procurement. Next week, the European Commission will unveil its Clean Industrial Deal, a plan to use Europe’s €2 trillion-a-year procurement market to boost local industry and accelerate the green transition. At the heart of the strategy? A “European preference” clause, designed to steer public contracts towards EU-made clean technologies. By 2026, procurement rules will be overhauled to prioritise sustainability, resilience and local production – a shift that could push European industry forward but also test the limits of international trade rules. It could help to align public spending with climate and industrial policy, a long overdue move to strengthen Europe’s green tech sector. But critics warn that tilting the playing field could provoke trade disputes and drive-up costs for public purchasers. Will European companies rise to the challenge, or will governments end up paying more for less competition? The plan also introduces new carbon footprint labels and transparency rules to give public purchasers the tools to make greener choices. The Greens in the Parliament welcome the initiative, but warn that public money alone won’t be enough. Without clear funding and coordination between member states, the deal risks becoming another half-baked experiment in industrial policy. So, the question is: is this a game changer for European industry, or just a protectionist headache in the making?
DRAGHI AND LETTA: EAT THE WHOLE CAKE
When Mario Draghi and Enrico Letta speak, Brussels pays attention. This week, the two former Italian prime ministers offered their views on Europe’s economic future – but in very different ways. Draghi warned the Parliament that Europe is falling behind the US and China. He stressed the need for collective action, emphasizing that a rapid, ambitious, and large-scale response is essential to maintain economic competitiveness and secure the future in the face of growing geopolitical challenges. His advice? A major overhaul of the single market, massive investment at EU level and one point that many prefer to ignore: more joint debt. Meanwhile, in an interview about his own report, Letta focused on fixing Europe’s fragmented single market and making it easier for businesses to thrive. Their conclusions overlap: Europe is sluggish, fragmented and in desperate need of reform. But Letta strongly warns against cherry-picking his recommendations. He told politicians not to cherry-pick but “eat the whole cake”, and align the Green Deal with a simplified single market to ensure long-term growth. But whether EU leaders will take the advice seriously, or simply nod along at the next summit, is still up in the air.
WHO’S AFRAID OF SOME MORE SECURITISATION?
Securitisation, we’ve talked about it here before. If you were around in EU policy two decades ago, you might remember the wave of regulation initiated by Michel Barnier after the Great Financial Crisis of 2008. Securitisation is a financial technique converting debt into marketable securities to “offload” the risk from the balance sheet of a financial institution. It played a role in accelerating the crisis, largely because investors had bought packages of mortgages only to find out that later that they were full of loans that would not be paid back given the economic crunch. But the problems of yesterday have been fixed, the credit rating agencies that gave these packages full of junk a good label are now regulated in the EU, and we’ve even relaunched “simple, transparent and standardised” securitisation (STS) and then green STS. So why is the topic hot again? Well… “a better balance between safety and growth needs to be found”, according to the Commission in a call for evidence published earlier this week. In other words: we’ve turned the dial too far on safety which has led to “high regulatory costs for issuers and investors” and so the Commission with its initiative due in a few months wants to see a “deepening of the EU capital markets, freeing up additional lending for EU households and businesses as well as financing EU transitions, to make the EU economy more competitive and resilient.” Sounds familiar?