The European debate on the new Stability and Growth Pact invests several European and global challenges at the same time. Each of these will have consequences for the others. And also for the balance of power between the “European government” and the member states.

Over the past few years an impressive series of events has hit Europe (and the whole world). After the global financial crisis of 2007-2009 and the European sovereign debt crisis of the first half of the 2010s, COVID struck at the end of 2019. Then came Russia’s invasion of Ukraine. And after that, the energy crisis and soaring inflation. Additionally, all this happened as a new structural scenario is emerging: the environmental crisis that forces a global response; and contradictory thrusts for the search of a new world order brought about by the decline of US leadership and the emergence of new powers (China, India and others); in fact, we are facing an alternative between renewed international cooperation with shared global rules and the clash between superpowers for the global hegemony. It is not surprising that all this is prompting a rethinking of the European economic architecture. A first, historical, response has already come in the form of the Next Generation EU (NGEU), the post-pandemic Recovery Plan financed with debt jointly guaranteed by member states.

And now two other fundamental topics are up for discussion: the revision of the Stability and Growth Pact (SGP); and the development of a new European industrial policy. Put together, these areas of intervention promise to reshape the global EU economic governance.

The European Commission itself recognised that the current version of the SGP doesn’t fit the modern world. When the pandemic struck, the general escape clause of the SGP was activated, allowing member states to react to the COVID-19 crisis by providing sizable fiscal support to their economies; this strong countercyclical response proved highly effective in mitigating the economic and social damage of the crisis. The NGEU was then set up to help the various European economies to recover and to shift towards a greener and more digitised future. At the same time, the crisis resulted in a significant increase in public debt ratios, highlighting the importance of reducing them to prudent levels; indeed, fiscal prudence in times of sustained growth helps build fiscal buffers that governments can use to provide countercyclical fiscal support in times of crisis.

The time has thus come for a comprehensive reform of the SGP. The current set of rules is based on the famous Maastricht’s thresholds: a country’s debt to GDP ratio and annual deficit to GDP ratio cannot exceed, respectively, 60 per cent and 3 per cent. If the government debt is beyond such a limit, the country is required to lower its excess over the 60 per cent limit by one twentieth each year. This reduction plan, which constitutes the “corrective arm” prescribed by the SGP, is objectively too rigid since it doesn’t take into account the specific economic conditions of the country under examination. The same argument holds for the general set up of the current rules.

The reform proposed by the Commission is aimed at relaxing these parameters and, at the same time, at politically engaging the member states. Essentially, it is based on a multi-year approach. In a first moment the member states would be classified in different risk categories in accordance with a debt sustainability analysis. The Commission would then propose a reference multiannual adjustment path to the countries with substantial and moderate fiscal challenges based on the net primary expenditure, i.e. the expenditure under the direct control of the governments. The goal of the plan is to bring the public debt on a plausible and continuously declining path at the end of the 4-year period.

At this point, the member states can present a counter-proposal. It has to include a detailed description of reforms, public investments and fiscal adjustments needed to put the debt on a declining trajectory; the involved government may also request an extension of the adjustment period for three more years. Finally, the European Council would be in charge of approving or rejecting the country’s proposed plan. If rejected, and in case of no agreement between the Commission and the member state, the adjustment path initially proposed by the Commission would automatically become the reference plan. From a governance perspective, this process would increase the federal power of the Commission which supervises and coordinates the national economic plans, thus promoting converging growth and stabilisation paths and, in turn, favouring the integrity of the entire system.

The reform proposed by the Commission represents an important step in the right direction both from a purely economic point of view and for its political implications. First of all, it is based on the net primary expenditure which, as said, represents the costs under the direct control of the governments. This ensures that the country, in carrying out its adjustment path, is shielded from variables like interest rates movements (which can be due to speculative market swings or to monetary policy interventions) or higher automatic stabilisers (like unemployment and social benefits). This gives the government enough room to implement the plan independently and to focus on the actions under its direct control. Furthermore, several economists have argued in favour of stabilising the public debt by focusing on the net primary expenditure: the public debt does converge towards a steady level if the net primary expenditure is under control, provided that the economy enjoys a certain level of growth.

Another relevant merit of the proposed reform is the multi-year approach. This allows for medium and long-term planning, which is the proper time horizon in terms of public finance sustainability. The government is given a good timespan to manage the level of spending according to the chosen fiscal policy. In particular, the duration of the plan may coincide with the government term, which means it is not forced into a short term rush but it has the opportunity to manage its economic policy throughout the whole legislature. This is first of all a sound economic principle on its own. And secondly, this translates into a political stimulus: making more stable governments, a challenge particularly important for several European countries unfortunately accustomed to short-lived governments (like Italy for example).

At the same time, member states are more actively involved in the process. While in the old system they were asked to curb spending in a rigid way, now they work together with the European institutions. This method gives them full political responsibility for the actions undertaken, covering a period of several years. The Commission’s objective is therefore twofold: giving more flexibility on the economic front and more stability and responsibility on the political one.

Not only stability

Ursula von der Leyen has recently announced that the Commission will propose a new EU Sovereignty Fund next summer to support European industry’s green and digital transition. The project is at a very early phase; indeed, there is not a formal proposal yet. Nevertheless, the final objectives of the initiative are already clear: helping the economic growth with structural interventions and launching what has been defined as “strategic autonomy” i.e. a new European industrial policy. Several political leaders and pundits have already been arguing in favour of such initiatives for a long time. Then, the disruptions created by the pandemic and later by the war and energy crisis have made clear that a European intervention in this direction is really needed. Lastly, the political pressure to act has mounted as President Biden signed into law the Inflation Reduction Act (IRA) with its “made in America” subsidies.

The Commission is determined to accommodate the transition and to make the European economies more resilient. It is urging the member states to shorten permitting times for green projects, to ease redtapes and to retrain workers with the new skills required. It has spoken out in favour of signing long-term agreements with countries that supply crucial raw materials in order to reduce dependence on single suppliers. Investments throughout the entire supply chain will be proposed.

However, as we are still at a very early stage, the details of the interventions are still to be defined. A first crucial point will regard financing. The most obvious choice would be the emission of Eurobonds, as already done for the Next Generation EU. This would allow the set-up of a Sovereignty Fund with enough scope to act decisively. It would also boost the creation of the capital market union and provide financial markets with more risk-free euro denominated securities. Hopefully, the likely resistance from Central and Northern European countries will be overcome (resistance that, of course, should be overcome thanks to the good usage of the funds received under the NGEU; it is reasonable, compelling indeed, to verify how the current resources are used before adding more common debt). Other, less preferable, alternatives might be direct contributions from member states or involving the European Investment Bank (EIB).

Possibly still more important will be the decisions made in terms of European industrial policy. In doing so, the EU absolutely needs to maintain the market-based approach it has always embraced. Responding to the American IRA with an indiscriminate subsidy race would make everyone worse off; on the contrary, the integration of the single market and the openness Europe has had towards the rest of the world have served the continent remarkably well. As of now, European leaders fear jobs and investments may move to America; but they also need to consider that Europe has a large, functioning and growing green industry, thus it is far-fetched for firms to abandon Europe massively. Better to use the Sovereignty Fund to invest in public infrastructures, build electricity grids, invest in renewables. Europe needs huge structural investments which cannot be sustained only by privates; that’s where the public pot should go. Of course, targeting help towards the poorer would be sensible, which is different from the sort of handouts for everyone approach some governments have pursued.

Making the EU economy more resilient will need a mix of “strategic autonomy” and diversification. The production of some essential goods might be internalised; at the same time, diversifying the supply chain will be important. Again, this is the job of a vigorous trade policy, on which the EU excels.

In short, in pursuing its industrial policy, the EU needs to build on its strengths: strong internal market, limits on subsidies, openness, multilateralism. It is worth noting that this approach makes sense from an economic point of view but also from a political one. The EU is a champion in international cooperation and often stands as a “normative power”, setting global standards for others to follow. War has erupted on European soil and geopolitical tensions are high almost everywhere. The EU is a landmark for multilateralism and should continue to act as such. Implementing a common European industrial policy is essential for the EU to thrive; at the same time, it must do it by remembering its strengths and, most of all, its ideals. The Commission has hinted into this direction; hopefully the process will follow this lead, preparing the ground for a bigger Europe into a cooperative world.

Combining stability and growth

Global public debts ballooned over the last decades. A first considerable surge happened because of the financial crisis of 2007-09. When COVID-19 struck, governments in rich countries spent freely to support their economies. They were right: they learnt from the previous crisis when public response had been too timid in helping the economies out of recession. Fiscal largess has been favoured by central banks which slashed interest rates and bought huge amounts of longer dated government bonds via their Quantitative Easing (QE) programmes. But now governments face two major problems. The first one is that it is difficult to reverse public spending. Once a bonus or tax relief has been introduced, it is politically tricky to remove it; moreover, after some time of big public support, people now come to expect the government to do the same when the next crisis hits. This is another reason to refrain from a costly subsidy race, preferring instead the sort of carbon pricing scheme the EU has successfully implemented.

The second problem is that interest rates have now been increased by central banks in the attempt to tame inflation: they reached 5-5.25% in the US, 3.25% in the Eurozone and 4.50% in the UK; only Japan has still a loose monetary stance but even there pressures to start tightening are mounting as inflation is approaching an uncomfortably high level. Costs for interest are then climbing and, as a consequence, debt levels risk becoming unmanageable.

Against this backdrop, it is important to consider the double objective the European Commission is aiming for. On the one hand, the reform of the SGP wants to lower government debt in a gradual but credible manner. This is particularly relevant at a time when several factors promise to keep pressures on already strained government budgets for a long time: the green transformation of the economy, more defence spending, the reconstruction of Ukraine, increasing health care costs linked to ageing population. On the other hand, the European industrial policy wants to create the structural conditions to help the economy grow and make it more resilient; combining growth with fiscal prudence is indeed essential for stability itself. Besides, contrary to many European governments, the Commission has fiscal space to act properly, which is why it would be reasonable to finance the Sovereignty Fund with European resources.

The process for reforming the SGP and setting up the European industrial policy has just begun. With the various legislative steps the European Parliament, Council and member states will surely have the possibility to improve the initial proposals of the Commission and make them as suitable as possible. However, at the present time, it is relevant to highlight that the direction indicated by the Commission is the right one: fiscal rules must be reintroduced as the shocks from COVID and the energy crisis give way to ordinary conditions; such rules need to be reviewed in a more flexible and, as a consequence, credible way; additionally, European intervention is needed to spur growth and accommodate the economy towards the new normal, through a bigger and sustainable EU budget.

The war in Ukraine is hastening the transition, already set off by the pandemic, towards a new phase of globalisation. The global market that we have known until today is likely to change radically: the fast movement of goods, the fragmentation of the production processes and the cost efficiency are bound to undergo profound changes. The “just in time” framework, made possible thanks to digital technology and to the high reliability of transport and logistics, is at a turning point; this is a very efficient production model which requires, however, high levels of international cooperation — which are now fading.

Indeed, such cooperation was already dwindling. True, in recent years this has been the result of the disruptions caused by the pandemic; but this process has been under way for some years already. As early as January 2019, The Economist coined the term “Slowbalisation” to indicate a slowdown in world trade (The Economist, “Slowbalisation”, January 24, 2019). This can be attributed to an environment of increased mutual mistrust between different areas of the world, as well as within mature democracies with the take-off of populist and nationalist movements. The mayhem generated by the war is set to strengthen this trend, amplifying the distance between the West and the rest of the world.

The new confrontation between different political and military blocks, a possible outcome of the conflict, forces to overcome the cooperative model underpinning the fragmentation of the global supply chains. The return to the confrontation between blocks of influence^[1] opens the new phase of the “just in case” economy. Supply chains are not reconfigured based on efficiency but on reliability and control. The distinctive feature of the “just in time” economy is the hyper-efficiency. The “just in case” model involves greater resilience and control, whose costs in terms of lower efficiency will ultimately contribute to the price dynamics.

On the other hand, bringing back home parts of value supply chains will raise cost but, likewise, fostering economic development, the wealth created will remain within the country or countries of the same area of influence. Perhaps we are close to a turning point for global trade, but it is too early to say for sure how it will actually evolve.

Europe, with its energy vulnerability, is cought into this huge reconfiguration of global value chains. The upsurge in gas and oil prices is starting to bite into the balance sheets of households and businesses: for example, in Italy in the first quarter of 2022 electricity and gas bills will increase between 40% and 50% (depending on the type of contract), in Germany the increases will be around 60%, while in the UK some operators have been forced to close their activities.

The energy transition becomes more complicated, the taxonomy for the energy mix as indicated by the European Commission divides the European governments over the inclusion of nuclear and natural gas, with the preferences of each country dictated by its specific energy positioning. For its part, the European Commission has recently classified gas as “green transition”, therefore usable during this phase, while France and the Netherlands remain in favour of nuclear power (President Macron in February announced France plans to construct six new plants).

Europe’s dependence on gas and oil is still enormous: the Center for Strategic and International Studies estimates that Europe imports 400 billion cubic metres of gas per year (CSIS, “The Energy Weapon Revisited”, March 18, 2022). “The events of these days highlight the recklessness of not having diversified enough our energy sources,” Mario Draghi told the Italian Parliament, stressing that since 2014 Europe has become even more dependent on Russian supplies. The common energy policy has been virtually absent and now, in less than ten years, the Green Deal aims ambitiously to reduce the greenhouse gases dispersed in the atmosphere by 55% compared to 1990 data. Adopted in July 2021, the “Fit for 55” climate package strengthens the objectives set in the 2019 Green Deal and delineates the new path to reduce harmful emissions by 55% by 2030 and eliminate them within 2050.

“What is the best time to plant an oak?” the owner of the land asked the gardener. “The best moment was twenty years ago” he replied “but the second best is today”. The old Chinese saying highlights the pointlessness of thinking about what should have been done ten or twenty years ago to optimise the energy provision and diversify its sources; it is better to devote efforts and resources to the current situation, to what can be done in the short term to manage the war emergency and to what must be done in the medium and long term to achieve the objectives of the “Fit for 55”. The goal is ambitious, fossil fuels meet roughly 80% of the global energy needs, the oil world daily consumption is about one hundred million barrels, over fifteen tons of coal, 11 billion cubic metres of gas. Huge numbers that cannot be drastically reduced without strong political will and a significant coordination effort between countries.

The current technological limits related to energy storage cause the massive use of renewable energies to be delayed over time (in any case, a huge number of batteries will have to be produced, rare earths will be needed, the batteries will then have to be disposed of). Remaining as concrete and realistic as possible, in the immediate future natural gas is the most efficient energy source to accommodate the energy transition: it is abundant, versatile in its applications, less polluting than oil and coal. However, for many reasons such as the lack of foresight, the excess of confidence in the potential of renewable sources or, maybe, to gain easy consensus among the public opinion, in different European countries the exploration of new gas fields and the installation of regasifiers – the plants that convert the liquefied gas to its gaseous form and make it available for consumption – have been blocked. The regasification plants are mainly concentrated in Spain, France and the UK, and certainly they are not able to significantly increase their capacity to cope with the emergency in the short term. Bruegel, a Brussels-based think tank, estimates that, in the event of a cut-off from Russia, next winter the European consumption will need to be rationed up to 15% (Bruegel, “Preparing for the first winter without Russian gas”, February 28, 2022).

The adoption of a common European energy policy can no longer be postponed and the current supply of renewable energies is not enough. It is necessary to plan an energy system that overcomes the current model of “vertical energy chains”, that is, organised with given resources allocated to specific uses: for example oil is used for transport and industry, coal and natural gas are used for heating and electricity generation.

The remodeling of the energy system basically involves all the different economic-political areas of the world. Focusing on the European Union, three main strategic choices stand out. First, the creation of a single European energy network through the connection between the existing national ones. In this context, there are some inefficiencies that can be overcome: just think of the American gas arriving in Portugal and Spain which doesn’t reach other countries due to the fragmentation of the national networks. Second, centralised purchasing of gas and, in general, energy sources. This path has already been pursued for the supplying of vaccines thanks to the successful initiative by the European Commission, which ensured that more fragile countries were not left behind. A similar approach could be followed in the energy context. And third, common storage of the sources, which can help in managing them more efficiently. This strategy should be implemented as soon as possible to let the EU reach a certain strategic autonomy in the energy field.

The legal foundations for an innovative and efficient common energy policy are provided by the Treaty on the Functioning of the European Union (TFEU). Article 170 promotes “the setting-up of an area without internal frontiers” for the interconnection of energy infrastructures; additionally, article 122 recalls the “spirit of solidarity between Member States” and allows a common energy supplying. Therefore, there is no need for a Treaty change. In both cases, less waste and more savings would be ensured and a completely new energy model could be created — integrated in the methods of supplying and distribution, as well as more geographically diversified and therefore more fair and stable.

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^[1] For a comprehensive discussion about the world political consequences of the current turmoils, please refer to another contribution published by The Ventotene Lighthouse: https://www.theventotenelighthouse.eu/strategic-compass-some-considerations-on-the-eus-role-in-the-world

Giorgio Valentino Federici

University of Florence, Italy

Africa, in particular the sub-Saharan one, will need energy for its development, possibly obtained from renewable sources. Projects for the construction of large hydroelectric infrastructures, together with the use of photovoltaic and wind power, can meet this goal by reducing environmental impact and limiting the use of fossil fuels. They could be developed in cooperation of the European Union, for a Euro-African ecological transition.

In the scenarios bound to the Next Generation European Union for the year 2050 and beyond it, the international context, especially the African one, is not adequately taken into account. In the envisaged scenarios (2050, 2100) the most significant driver will be demography (Livi Bacci, 2015). The African and Sub-Saharan populations will become increasingly meaningful and the conditions for their human development will be decisive as well. Could living standards be improved in an area that by 2050 will be inhabited by ¼ of the world’s population and 2/3 of the 10.900 million global citizens predicted for 2100 by the United Nations (Neodemos, website)? An even greater number of Sub-Saharan youngsters, who are already connected to the world, will be wanting to better their condition and to be able to move.

What is the starting point? Nowadays, more than 17% of the world’s population lives in Africa. However, the continent’s global energy consumption is just 4% and the daily income of half of the population of Sub-Saharan Africa is around 1 $.

Therefore, the first issue I will be discussing is: to what extent will renewable energy sources (water, wind, solar, bio-fuels) exploited for the production of electricity, which is an essential element for development, be able to contribute to the gradual transition of the African continent out of poverty, as well as to what extent this issue might be related to the European Green Deal.

I would like to start by mentioning the hydroelectric potentials of the African continent and especially of the Congo River, which is basically intact: it has been a renewable resource available for decades, which has not been significantly affected by the climate change hypothesized to date.

There are approved projects by the countries of the African Union for the hydroelectric development of the Congo Basin that ought to be completed quicker with the partnership of the European Union, which only recently has been realizing what a great opportunity of energetic development this could represent for the African citizens and directly or indirectly for the European population. Moreover, with regard to migration flows, which seems to concern European citizens the most, it is clear that only by creating African developmental points of convergence allowing fruitful migration flows within Africa, it will be possible to offer alternative options to the movements towards Europe.

With the dissolution of the Soviet Union in the early 1990s, Africa has basically ceased to count in geopolitics. China was the only country to understand Africa’s potentials in time and it took over a space making it a leader country in many parts of Africa. With reference to Congo, the 50-years’ concession for the exploitation of cobalt mines in the southern regions of the Democratic Republic of Congo made China the world leader in battery production. Congo’s mining exploitation is and will be closely linked to the river’s hydroelectric development, in particular with hydroelectric power plants in the Inga area, which are located close to the river mouth. As we shall see, China is a key player in the construction of such power stations as well.

Out of poverty: energy and electricity

No development is possible without energy, especially without electricity.

The transition from renewable energy sources (with annual, seasonal or daily cycles: human and animal labor, water and wind mills, sunshine for fauna and flora) to non-renewable energy sources like fossil fuels for the production of electricity has produced an acceleration in human history, which in just two centuries (Smil, 2020) has enabled an extraordinary demographic growth with a simultaneous increase of the HDI, the Human Development Indices (Federici, 2018).

There would have never had an industrial revolution, if mankind had to rely solely on renewable resources. Nowadays there are no examples anymore of countries emerging from poverty using exclusively renewable energy. It is exactly thanks to cheap energy’s production and transportation deriving from fossil fuels (oil and natural gas) that several countries (with a total of about 5 billion people) have become even richer and/or have freed themselves from poverty through the control and trade of those sources. Those countries are currently virtually emitting all the greenhouse gases that are causing global warming. They are trying to tackle such an issue by declaring a reduction in emissions, albeit the different paces and the modest results so far.

On the other hand, some 3 billion people will still not have benefitted from the energy transition from renewable sources to fossil fuels and from the access to electricity in 2021 and will therefore livein poverty. Those people live in areas of the planet where the most significant demographic growth is expected between 2050 and 2100. Especially Africa with around 600 million people out of its total 1.4 billion inhabitants has no access to electricity.

Beyond recent declarations of principle, it seems that Europe is neither intending to concretely address such issues, nor understanding the fundamentally beneficial role it could play not only for African, but also for European citizens.

The “Green” contribution to the African development

To date, a strategy for energy development limiting carbon dioxide emissions can only benefit from renewable resources and from the option offered by nuclear power. The possibility of using nuclear power stations on the African continent, however futuristic it may sound, is instead an option pursued by certain countries (especially by China and Russia), which are foreseeing a future colonization of the continent (Il caffè geopolitico, website). However, it is not the nuclear option that I am intending to dwell.

The African Union has long identified a number of areas suitable for large-scale hydroelectric power plants: the Congo River basin, with a potential of 774 TWh (one terawatt hour is equal to one billion kWh) per year, the Nile basin in Ethiopia (290 TWh) and the Zambezi basin (38 TWh). Were those resources fully exploited, the continent’s needs in the medium terms could be extensively covered.

On those watercourses there are already a number of major projects underway, some of which, such as the Great Ethiopian Renaissance Dam, are troublesome and divisive among various African countries. The environmental impact of these large-scale projects must be taken into account, nonetheless the benefits are highly substantial.

The hydroelectric exploitation of the Congo River seems to be unifying the interests of plenty of countries. Moreover, it has a very low environmental impact. Let’s take a closer look at the Grand Inga Project at the river mouth.

The Grand Inga Project

The project was adopted by the African Union (AU) as part of its 50-years’ plan for coordinated development “Agenda 2063 (2013-2063)”, in which the vast majority of African countries, especially Sub-Saharan ones, are involved (African Blue Economy Strategy). According to UA, the project is closely related to the achievement of the MDGs-Millennium Development Goals. The exploitation of such a resource by several nations is based on the creation of a transmission network extended to most of Africa with an alternation of alternating and direct current at high voltage, which might even reach Europe. Such a network would obviously enable the connection of solar and wind power plant distributed throughout the territory, making it similar to the Italian transmission network.

In the Grand Inga Project power stations with a capacity of 40 GW (one Gigawatt is equal to one million kW) are planned, with an expected output of 260 TWh. To understand the relevance of such amount a reader only needs to compare it with the values of the total installed electric power on earth, which was 1308 GW in 2019 with a generated energy of 4306 TWh. The Italian energy peak was of 58 GW in August 2019. The capacity of Italian hydroelectric power plants in 2019 was 22.9 GW. Hydroelectric power plants in Africa had an installed capacity of 37 GW.

It is therefore an energy potential that could have an extraordinary impact on the development not only of DROC but also for a large part of the African continent!

Hydroelectric power plants in suitable locations guarantee long-term production (over a hundred years, if properly maintained) at a lower cost compared with any other energy resource. The average global cost of hydroelectric power in 2019 was 0.047 $ per kWh. For the development of the 40 GW Grand Inga Project a cost of 0.03 $ per kWh is estimated.

Thanks to the permanent water flow of the river, Inga’s plants are essentially of the run-of-the-river type and do not have large storage volumes, which means they need small reservoirs. The river’s flow is only reduced to a few tens of kilometers before flowing into the Atlantic Ocean. Such an environmental impact is clearly modest, although it will surely be opposed by rafting champions, who will no longer be able to fully enjoy Inga’s rapids!

Nonetheless, for Africa and especially for Sub-Saharan Africa, the exploitation of this renewable, permanent energy resource, which is not significantly affectable by climate change, has both very low costs of production and modest environmental impact, would be a strong harbinger for the development of the continent’s population. It should also be noted that the project does not involve the displacement of large populations: the area is inhabited by several ten thousand of people (37.000 according to the NGO TERRALINE (Website), which regards the project with high criticism), who could finally be helped out of poverty.

Benefits for the Sub-Saharan African population

In 2020 the annual growth of electricity consumption per capita in kWh was as follows: USA 11.730, Italy 4.703, Nigeria 115, DROC 72. All the other Sub-Saharan states have quite low allocations except for South Africa, which has 3.668 kWh available per capita thanks to energy import from the huge Cabora Bassa hydroelectric energy plant on the Zambezi River in Mozambique and other hydroelectric plants in Lesotho over 50 years.

In 2060, assuming Grand Inga being operative and a hypothesized interconnection being present, the average annual electricity availability per capita on the entire Sub-Saharan region (which is ¼ of the world’s population) might reach around a thousand kWh per capita.

According to GEIDCO, the estimated energy availability in 2100 will be 658 TWh (which is the entire potential of the Congo Basin) allowing an electricity growth for 35% of the world’s population of about 2.000 kWh per capita. This energy would be employed for both civil and industrial purposes enabling industrialization, which is currently lacking. Unfortunately, today’s small plants in Inga (1 GW) are exploited for mining development and not even partly for civil purposes. These plants are managed by a consortium led by GEIDCO, a Chinese company operating the world’s largest hydroelectric plant: the three Gorges on the Yangtze River (22.5 GW). As mentioned earlier, China agreed with DROC on the 50-years’ exploitation of cobalt mines located along the southern Congo Basin.

Projects concerning solar energy in Africa

This paragraph shows a brief outline of how solar energy (both photovoltaic and thermal) is being developed in Africa also by means of comparison with hydroelectric projects. The electrification of Africa is underway (Puig, 2021). Private companies from several countries, including European ones, have partnerships in African countries, especially with the aim of distributing electricity supply, mainly based on photovoltaic energy, on the territory. The goal consists in, among other things, to set up mini-grids for small communities, which are often not connected to national electricity distribution networks because of their complete absence or their deficiency.

As for large solar power plant projects, the DESERTEC project (Website) ought to be mentioned. The idea came up in the late 1980s after the Chernobyl accident provoked a crisis in the field of European nuclear development. The project aims at using deserts around the world for the creation of solar power plants, which, according to the members of the DESERTEC foundation (established in 2009), could potentially solve the planet’s energy difficulties. The project has also been adopted in the Sahara Desert and involves mainly the MENA countries, which include Mediterranean North African countries, as well as Middle Eastern countries.

At the beginning the aim was to bring electricity to Europe using the Sahara Desert, in what was described as a “neo-colonial” project. Today’s project instead aims at encouraging the growth of the MENA countries. The possibilities offered by solar energy have however some drawbacks specific to African countries: such issues are related to their intermittency, making them of little use for industrial development, material procurement and land consumption (Seminara and Carli, in this volume). Additionally, the management of distributed generation (at a small community level) based on solar panels and batteries may present serious maintenance and above all safety issues. Certain Sub-Saharan states have no territorial control to prevent equipment theft from small plants on large areas.

In terms of occupied soil, a comparison between hydroelectric and photovoltaic energy density (power in kW per unit of occupied area) is merciless. The installed capacity of Italian photovoltaic plants in 2018 (TERNA, website) was 20.108 GW and such plants occupied an area of 301,171 km2.

Plants Energy density

Photovoltaic energy Italy 67 kW/km2

Grand Inga power station 177.000 kW/km2

Average hydroelectric power stations in Switzerland 56,000 kW/km2

Is poverty sustainable?

Large projects concerning hydroelectric power are often fought back by environmental movements and NGOs operating in Africa, which have reported to the local population both the limited benefits of large dams, as has sometimes been the case to date, and the environmental concerns. Even potential international sponsors, such as the World Bank Group, regard these projects suspiciously, due to the link with corruption, common to African countries. In the last twenty years such suspiciousness has led to a drastic reduction of international funding for infrastructures (dams, roads, transport), which are a fundamental development factor, in African countries. Funds have instead been invested in social assistance and small-scale solar and wind powered plants, which are favored in terms of “sustainable development”, as they could also be introduced into developing countries. Even the United Nations shared the view that no development could have been possible without energy and infrastructures, in stark contrast to what has been happening in wealthier countries.

The opposition of certain NGOs to the construction of large and small dams with the aim of not altering the “natural” conditions of waterways has been particularly unreasonable and often damaging. The argument of climate change is especially used to oppose both the control of reservoirs and hydropower energy plants without taking into account that climate change is mainly related to water management, storage and protection and to water-related risks. Large and small reservoirs are and will be as indispensable to Africa as they are and will be in ours.

The great opportunities offered by the Inga Project, the consensus of the African Union, the reduced environmental impact and the potential palliation of poverty, should create a strong international collaboration aiming at developing the Project the best way possible, without forgetting the fact that in any case the construction of large infrastructures causes social and environmental issues.

The creation of a large interconnected structure could allow an integrated management of renewable (hydroelectric, solar and wind power) resources with the additional creation of pumped storage plants to limit the use of batteries, which are necessary for solar and wind power. To conclude, for Sub-Saharan countries, the joint management of electricity could be an extraordinary opportunity for the construction of strong national and supranational institutions, which are currently lacking.

Towards a Euro-African energy transition

Europe’s energy transition could be linked to Africa’s one by means of complementary strategies heading towards renewable energy forms. In terms of a reduction of greenhouse gas emissions, wouldn’t our huge funding for wind and photovoltaic power be better spent in Africa for palliating poverty by producing renewable hydroelectric power, which has very low costs for large-scale installations and, which could be transmitted to Europe as well? Or could it be used to produce hydrogen locally for transportation later?

The high solar irradiation per square meter in our country (it is said we are the Arab Emirates of the future!) underlines the importance of photovoltaic energy, which will inevitably cause strong environmental impacts, objections and delays during the transition. Wouldn’t it be better to put panels in the Sahara Desert, which beats us in terms of irradiation and brings electricity or hydrogen to Europe, avoiding disastrous land consumption, reducing any environmental impact, positively influencing the development of the southern shore of the Mediterranean and thus creating the conditions for a reduction of migration flows?

Is it possible to conceive a Euro-African energy transition?

Bibliography

GEIDCO (Global Energy Interconnection Development and Cooperation Organization), Research on Hydropower Development and Delivery in Congo River. Spinger.2020. Research on Hydropower Development and Delivery in Congo River. Spinger.2020.

G.V. Federici, Societàcosmopoliticaeculturadellimite, in 1948-2018: diritti umani in cammino, in «Testimonianze» n. 521- 522, 2018.

M. Livi Bacci, Ilpianetastretto, Il Mulino, 2015.

D. Puig , et al., AnactionagendaforAfrica’selectricitysector, Science 06 Aug 2021:Vol. 373, Issue 6555, pp. 616-619.

G. Seminara, B. Carli, COP26perilClima. 2 –Duequestioniplanetarie. «Testimonianze» n. 540

M. Shellenberger, L’apocalissepuòattendere, Marsilio,2020.

V. Smil, Energia e civiltà. Una storia. Hoepli,2021.

Sitography

DESERTEC: Sustainable Wealth for Every Human on Earth. https://www.desertec.org

Il Caffe Geopolitico: https://ilcaffegeopolitico.net/170697/lafrica-sulla-via-del-nucleare

Neodemos:https://www.neodemos.info

TERRAONLINE: https://www.terraterraonline.org/blog/inga-3-una-mega-diga-sul-fiume-congo-fara-decine-di-migliaia-di-sfollati/

TERNA; https://download.terna.it/terna/Annuario%20Statistico%202018_8d7595e944c2546.pdf

(*) This article has been published on Nov. 2021 on the Italian Revue Testimonianze (nr.540) https://www.testimonianzeonline.com, which we thank for the authorization and translated by Rebecca Zani

On August 9th, the IPCC Report (UN Intergovernmental Panel on Climate Change) was published. This report updated to 2020 is based on 14,000 studies carried out by experts from 195 countries. Within the 4,000-page report, the panel’s scientists analytically illustrate the climatic consequences in different geographical areas of the world due to CO2 and other greenhouse gases emitted into the atmosphere through human activity (which add to the stock of existing gases and will persist in the atmosphere for hundreds or thousands of years).

The IPCC then illustrates the different scenarios that could arise if the increase in the Earth’s average temperature is not limited to 1.5°C, within 10 or 20 years as agreed in the 2015 Paris Agreement. The latter was ratified and entered into force by 196 States, including all the main polluters, namely, the European Union (EU), the United States, Russia, South Korea, India and China (which, however, managed to postpone from 2050 to 2060 the target of achieving net zero climate-altering emissions).

The IPCC warns that global warming is occurring much faster than in the past, with the global average temperature having already risen by 1.09°C compared to the pre-industrial era. The Report describes the consequences of this rise in temperature as far worse than those predicted in previous Reports: the areas subject to fire risk have increased by 75% since the year 2000; ice sheets are losing 8 billion tons of water a day, thus accelerating the sea level rise; in many countries the temperature has reached above 35°C and up to 50°C, for example in Morocco and Canada, for prolonged periods; increasingly violent typhoons and hurricanes have hit not only the Northern Regions, but also those of the South and East of the world, often followed by severe droughts; and desertification is increasing in Africa and in some areas of Southeast Asia.

According to the Report, even if commitments to reduce emissions (Nationally Determined Contributions – NDC) were to be confirmed and implemented by all current governments, global warming would still be limited to 2.1°C by 2030/2040, thus causing increasingly prolonged periods of extreme heat, a further acceleration of both the melting of glaciers and the sea level rise and the frequency and intensity of ‘extreme events’, resulting in mass migrations. Hence the UN Secretary-General António Guterres is not wrong in stating that the new IPCC report is a “code red” for humanity.

Once again, the EU and its Commission must be acknowledged for continuing to honour the Agreements signed in Paris (through the European Green Deal and Next Generation EU), by increasing the EU’s decarbonisation target from 40% to 55% by 2030, and making it an internationally recognised world leader in tackling global warming. An important agreement between the EU and the United States, represented by President Biden, was thus possible. This new-found transatlantic agreement has multilateral commitments and shared ESG (Environmental, Social, and Governance) objectives.

Linked to this agreement is Biden’s executive order on the production and sale of electric, hydrogen or hybrid vehicles by 2030, with a USD 1000 billion investment, as well as the presentation to the Senate of a USD 3,500 billion anti-poverty plan to support social and environmental programmes, with cost increases and tax benefits.

The EU’s driving force has targeted not only other states but also private companies, private and public foundations and independent NGOs, which have declared their willingness to commit to achieving climate neutrality by 2050.

After the new IPCC Report and its alarming statements about the fate of humanity, I believe that the EU’s responsibilities to the world have increased considerably. Therefore, we should ask it to “raise the bar even further” in order to maintain its leading role in the fight against climate change.

We must demand that the European Union:

– apply consistent carbon pricing within the EU and in relations with the rest of the world;

– increase the production of renewable energies not only in Europe but also in Africa, with appropriate international agreements;

– establish an agreement with the African Union to produce green hydrogen through photovoltaic energy in the countries on the South-Eastern coast of Africa that would be transported to Europe using the existing gas pipelines between the two shores of the Mediterranean;

– speed up the implementation of decisive measures in areas where there is a significant delay, such as transport and electric or hydrogen mobility (electric car, electric or hydrogen-powered public transport) and the green conversion of private and public real estate assets (insulation of buildings, use of roofs for photovoltaic production, electrification and digitalisation of all utilities).

Finally, the time has come to spend the EU’s large credit and sign a new pact among the main polluting states – possibly involving private companies, private and public foundations as well as NGOs – to give life to that multilateral, supranational institution in the energy and environment sector, which federalists have been demanding for decades. The “World Organisation for Energy and the Environment”, governed by an independent High Authority (based on the ECSC model in the European unification process), would operate under the control of the UN, with the task of managing the complex and constantly evolving climatic and environmental balances in the interest of humanity.

This new organisation should endow the already existing Green Fund with USD 100 billion and propose to generalise carbon pricing globally, at least among the countries that agree with it.

In short, the EU multilateral initiative must meet the challenge of the IPCC with the aim of stabilising global climate in the best way possible so that the planet will be livable for the human species.

The Middle East exploded once more this spring, around the crucial issue that fuels an interminable conflict: the Palestine question.

Wars have been fought over it, and terrorist operations of various types have been conducted.  All in a setting that sees the great powers (the US and Russia) engaged in flexing their muscles, and exploiting states, political and terrorist movements to shore up their power in this corner of the world.

Recent years have seen the advent of various “regional” powers (Iran, Turkey, Egypt, Saudi Arabia) intent on operating in a similar fashion, with the aim of carving out their own area of influence (hegemony), in agreement with one superpower or another, depending on the circumstances.

From the Second World War onwards, the Israel/Palestine question has unfolded in an area that is crucial for the development of the global economy due to the presence of oil, the main energy source of the twentieth century. To ‘govern’ this part of the world, political stability is vital, and the state of Israel has always been, and remains, crucial in this regard. 

While in the future the role of oil is destined to diminish as other forms of energy come into play, this remains a strategic hotspot: a crossroads between Asia, Africa and Europe, a key leg of the “Belt and Road initiative”,  characterised by one state equipped with nuclear weapons (Israel) and another that wants them (Iran): governing this area is therefore essential in terms of maintaining a global balance.

Attempts to stabilize the zone with a solution based on the “two peoples-two states” formula, with negotiations of various kinds, have proved unsuccessful. But even if this approach had been successful, it would certainly not have contributed to a “lasting” peaceful relationship between the two states. Borders are drawn based on power relations between states at any given time, and these can subsequently change, giving rise to new demands. 

As Alexander Hamilton writes in “The Federalist”, “To look for a continuation of harmony between a number of independent, unconnected sovereignties in the same neighbourhood, would be to disregard the uniform course of human events, and to set at defiance the accumulated experience of ages“.

An independent, entirely sovereign Palestinian state amidst other independent, entirely sovereign states would only generate increased conflict among states. This is the lesson that should have been learned from the history of the European continent through the centuries, and up to the tragedy of the Second World War. States with absolute sovereignty are by nature war-like (Kant).

We can therefore imagine that the Middle East peace process should involve:

1. Putting an end to the Russian-American tug of war for (ultimately gaining) control over the area, by including the European Union as a power interested in political stabilization based on the economic development of the area, no longer in thrall to oil, but linked to the energy transition towards a sustainable economy, starting with agriculture. Israel’s technological capabilities would be made available to the entire area (which would benefit from them to develop), in exchange for gaining access to a large market, something that Israel needs.
2. In this context we can therefore imagine an Israeli-Palestinian Federation as an initial nucleus of economic integration with neighbouring countries, thus also removing them from the interests of the regional powers in the vicinity.

All of this is based on the assumption that the EU, which stands to gain from a solution of this kind succeeds in exploiting this crisis, the umpteenth, to carve out a role for itself in foreign policy, thus discovering that the strategic interests of its main countries (Germany, France and Italy) coincide with European interests in  stabilizing the Middle East, which also borders on the Mediterranean.

Europe recently accomplished a quantum leap in budgetary terms to tackle the economic crisis triggered by the pandemic, by creating “European fiscal capacity”: common debt on future investments and increased budget, with a view to introducing new, additional own resources.

It is time for a quantum leap in European foreign policy too. The Middle East is the test-bed, right now.

It is up to the European Parliament to come up with solutions and not just “hope” that others will take care of it.

The European Commission has to take the initiative and lead the way, not wait for the European Council.

It is also up to European citizens to point out that political coexistence is possible, even between different peoples, religions and cultures. The construction of Europe proves it.

The COVID-19 pandemic has profoundly shaped and speeded up the actions taken at European level, especially regarding the economic governance. As a consequence, also the debate about further reforms has been affected, as the previous agenda has been totally overcomed by the events.

This crucial aspect about the future of the EU economic governance has been addressed, among others, by a Policy Brief of the Jacques Delors Centre (“Everything will be different: How the pandemic is changing EU economic governance“), which highlights and discusses some key points. Based on this very interesting work, we would like here to provide our thoughts and recommendations on the main issues raised.

EU fiscal capacity and common debt

The first aspect to deal with is the newly EU fiscal capacity and its common debt. First of all, it is worth noting that the EU has been able to incur common debt under the current Treaties, which made it possible to provide a common answer to the crisis in a relatively short time. This will also enable the EU to fund new common expenditures in the future, under the legal basis already used. It is telling that Paolo Gentiloni, the European Commissioner for Economy, has recently noted that “if you introduce a new tool that works, it can be repeated”.

The Next Generation EU has been a dramatic turning point in the process of the European integration. For a start, the European Commission has been invested with the duty of closely monitoring the investment plans drawn up by the member states. Even if the projects will not be directly managed by the Commission itself, the investment guidelines provided and monitoring authority assigned at European level gives to the Next Generation EU a real sense of common federal action.

Additionally, the Next Generation EU allocates the resources to the member states by taking into account the asymmetric effects of the crisis. In general, it can be argued that a larger EU budget was badly needed in any case, regardless of the current economic situation: indeed, a large centralised federal budget is required for a currency union to work properly. Specifically, one of the primary goals of a federal budget is to provide support to specific areas within the union affected by an asymmetric shock. The ECB had already taken a comparable step in March 2020 when it launched the Pandemic Emergency Purchase Programme (PEPP) and, in doing so, it dropped the Capital Key rule by allowing itself to buy more sovereign bonds of the countries hit hardest by the pandemic. With the creation of the Recovery Plan, also the fiscal lever is now available to tackle asymmetric shocks, bringing the European Union closer to a proper federation.

Apart from the importance in fighting the COVID-19 related crisis, a key issue is what all this means for the future. According to the current redemption schedule, the EU will eventually withdraw its bonds from the market (the current plan is to start repayment in 2028, over the next three decades). This would be a mistake. It’s preferable for the EU to roll over its debt and keep its safe bonds on the market. Firstly, simply because withdrawing the EU common bonds would essentially mean transferring such a debt on the member states, which would be politically undesirable and financially expensive. But most of all, keeping the EU bonds on the market would be essential for creating a Capital Market Union, strengthening the international role of the Euro and making it easier to set up new European investment plans in the coming years. It is no surprise that Mario Draghi, the former ECB boss and current Italian Prime Minister, has recently called for the creation of the Eurobonds. In particular, in a comparison with the US, he stressed the importance of having a truly Euro safe asset, an integrated Capital Market and a Banking Union: these aspects would help creating a vast, common market for firms and consumers, with the obvious related benefits.

Lastly on this topic, the reform agenda must include a rethinking of the public debt and deficit rules. This aspect is far too complex to be technically addressed here; it needs an in-depth analysis by economists and politicians alike. We want here just to highlight a couple of points. The various thresholds on the public debt and deficit, as well as the path to reduce and keep them under control, were set up in a completely different economic context. Now, we have been facing a low interest rates – low inflation environment for more than a decade. Only in recent times economists have seriously started talking about inflation again, as lockdown measures are going to be eased and the effects of the enormous fiscal and monetary stimulus on the price dynamic have yet to be fully seen. In general, the need is to combine a set of rules that are flexible, in order to be adapted to the evolving economic environment, but also credible – for convincing the market and the public that the Government debts will not run out of control. But even more important, the rules need to be rethought in light of the new European public debt, which removes the burden of some expenditures from the national Governments and which in effect has created a new big macroeconomic player: the European Union.

Economic and Institutional architecture

After the Euro crisis, the EU created a framework for preventing and managing future shocks. The main problem with this architecture was that the process was largely technocratic, and the Economic Recommendations given to the member states were widely ignored. The monitoring authority given to the European Commission within the Next Generation EU will replace such a construction, transforming a technocratic process into a political one. Regardless of the specific form that future common investment vehicles will have, it will be necessary to maintain this type of control for economic policy coordination. Indeed, this political mechanism is far better than a technocratic one since it is more transparent and it makes the Commission accountable in front of the European citizens, making the whole system more democratic and understood from the general public.

Against this backdrop, one clear example is provided by the European Stability Mechanism (ESM). The ESM was an instrument specifically designed to be used during periods of financial distress and, given the exogenous nature of the crisis, the member states agreed to remove almost all the conditions attached to it: the only one remaining was to use the funds for health care costs, both direct and indirect. And yet the ESM has totally gone unused. The reason for this failure is twofold. First of all, in many countries populist parties used the pretext of the old tough conditions imposed during the Greek crisis to campaign against the new ESM which, as said, has actually been cleared by these very conditions. If you think this makes no sense, it’s because it doesn’t. Nevertheless, the intergovernmental nature of the ESM didn’t help in making it transparent and easily understandable by the citizens, thus somewhat facilitating the populist argument.

But most of all, the reason lies in the fact that no country would have known what to do with the ESM funds. Applying for the ESM loan required a plan for reforming the sanitary system, which no one had prepared. The pandemic has swept all national health systems and shown how ill prepared they were for managing a major challenge. In this respect, it would be more appropriate to introduce a European basic health system: the aim should be to provide common guidelines to the different countries in order to ensure equal treatment for all citizens of the Union, especially – but not only – in critical situations. Indeed, inequalities are totally unacceptable when it comes to personal health. A good case in point is given by the vaccines: smaller and less rich member states would have incurred difficulties in getting a fair share of vaccines. The centralised management of the situation by the European Commission, which was put in charge of procuring vaccines for a population of 450 million, has prevented this intolerable outcome. This is true, of course, regardless of the possible errors in the negotiations made by the Commission: this is not a judgment on the goodness of the work of the Commission in this case; this is an indication of how it is appropriate to structurally divide the tasks between member states and Europe to avoid inequalities. Setting up a European basic health system would help in ensuring equality in such a relevant context.

These examples show that the political interventions – which are necessary to implement the NextGenEU investments – make the Commission’s action increasingly political and not just technical, as it was when the European Semester was in place. And this will inevitably affect the future European governance.

Eurozone and EU-27

Lastly, the events of the last few years have cast doubts on the need of focusing certain reforms on the Eurozone dimension instead of the whole EU-27. The first step in this direction has been the UK’s exit from the EU. Even if “Remain” would overall have been a preferable outcome and the effects of Brexit will be a controversial issue for a long time, it is known that the UK has often tried and succeeded in watering down ambitious EU reforms. As a consequence, the focus needed to be shifted on the Eurozone dimension to make significant progress in such areas. As Brexit has become a reality, this is no longer the case. Indeed, it can be argued that the Next Generation EU would not have been possible with the UK in the EU (even if we cannot be sure of this, given that the dramatic circumstances called for unprecedented answers).

In addition, the non-euro member states have lost considerable weight. And looking forward they will even more, as new countries will join the Eurozone. This reinforces the case for addressing more issues at EU level, leaving aside the Eurozone format.

As a matter of fact, the Next Generation EU is a EU-27 project, as well as the 2021-2027 revamped EU budget. This has made the talks for a Eurozone budget totally obsolete and the decision-making has shifted at EU level. This is not only good in principle, but also convenient in practice: acting within the framework of the Union law makes it often possible to take decisions by qualified majority, instead of by unanimity. This allows to speed up the process of decision-making, a key point in successful politics. In this context, it is very important to point out that we are not facing a trade-off between reactive decisions and democracy. At a first glance, it may seem that unanimity requirements guarantee the respect of the will of everyone; but in reality, a situation where a single country has the power to block the other 26 can hardly be defined as a functioning democracy. Thus, the right direction should be to make it clear that in certain areas the sovereignty is correctly allocated at European level – for better serving the interests of all member states, as in the case of the Next Generation EU – and that in such areas the EU-27 framework should always be chosen whenever possible.

Perhaps the best perspective for understanding the political cycle that is beginning for the new American Administration is that offered by the editor of Foreign Affairs, Gideon Rose. According to Rose, the global political cycle that is now commencing had its origins in Woodrow Wilson‘s attempt to establish an international order based on the League of Nations (the first founding act); it continued with Franklin D. Roosevelt’s success in establishing multilateral institutions, whose functioning, however, was based on American power (second founding act); it continued with the extension of the multilateral order, promoted by George H.W. Bush and Bill Clinton, to new sectors, such as finance, and to new areas of the world, such as China’s entry into the WTO, but not Gorbachev’s USSR, which could not benefit from the global market (third founding act). This, however, took place without adequate consolidation of the governance capacity of the existing multilateral institutions, since the underlying idea was that the global leadership of the USA (the “indispensable nation“) was sufficient for their functioning. This choice marked the beginning of the end of the American century. The fourth founding act, which should consist of relaunching the so-called “liberal world order”, now in crisis, is the challenge that awaits Joe Biden. According to Rose, Biden should resume the Rooseveltian path, and also introduce, according to others, new multilateral institutions promoted by the Western democracies alone, such as the Transatlantic Strategic Partnership Agreement .

This solution is based on a theoretical-practical assumption that we believe is wrong. It is wrong to attribute the disastrous military interventions, the endless wars in Afghanistan, Iraq and Libya, and the financial crises and growing economic inequalities that followed Bush senior and Clinton Administrations, to the failure of a non-existent “liberal world order“. This expression, if applied to the current multilateral order, is in fact an oxymoron: if one intervenes in a country to “export democracy”, one can find oneself – as in fact has happened – in one of the three unhappy situations predicted by the liberal John Stuart Mill (A Few Words on Non-Intervention, 1859), including the absence of an internal consensus of a democratic political system that forces a permanent military presence. But it is above all with respect to the contrast of financial crises and global economic inequalities that another liberal, Lionel Robbins, reminds us that “the institutions characteristic of a liberal society are inconceivable without a government” and that “it should be evident that they are incompatible with the lack of security” (Economic Planning and International Order, 1937), highlighting that the government of globalization is the missing element.

To date, the only instruments that come close to this latter ideal are multilateral institutions, the most important legacy of the American century, which allowed us to move from a world of sovereign and independent states to a world of sovereign and interdependent states. American multilateralism, which matured in a context where political situations appeared insurmountable, reached its zenith in the early years following the end of World War II. Since then, partly because of the culpable delay in Europe’s progress towards unification, the logic of power politics has prevailed, and the American role has progressively taken on the guise of hegemony, eroding, over time, the most innovative and noble aspects of multilateralism. However, this later decline takes nothing away from the revolutionary significance of the original premises of multilateralism. With it, for the first time, the prospect of progressive world unification was no longer confined to the sphere of ideal aspirations, but could be the object of concrete policy and, therefore, become possible.

Certainly, it will be necessary to strengthen multilateral institutions, and allow them to function. The change of pace is that indicated by Joseph Stiglitz, for whom “The only way forward is through true multilateralism, in which American exceptionalism is genuinely subordinated to common interests and values, international institutions, and a form of rule of law from which the US is not exempt“. In particular, they should allow those institutions to pursue the purposes for which they were established. But this is not enough: a country’s voluntarism alone does not overcome the existing power relations between states. It is necessary for the USA, and other willing countries, to be joined by the EU, so as to form an alliance within the multilateral institutions – United Nations, WTO, IMF, World Bank, ILO, etc., of which, for better or worse, authoritarian countries are also part – to enable these institutions to provide global public goods and affirm the universal values for which they are responsible. Only in this framework can the idea of the Concert or League of Democracies make sense. With the recent EU-China agreement on investments, the Union has timidly begun to set an example, asking China to respect the ILO conventions – to which it adheres.

The end of the American century does not mean that the US no longer has a decisive role to play. It only means that, isolated, and without renouncing a part of their sovereignty, the US will not be able to contribute to the birth of a new world order. Biden cannot reverse what, with increasing evidence, is looming as an irreversible historical trend: American decline and the emergence of China and other continental powers. What Biden can give Europe, and the rest of the world, is four years to design a new world order, because Trump’s election, as evidenced by the more than 70 million votes he received, was not a mere parenthesis in American politics.

The decisive word will have to come from the Europeans, who will have to decide, for example, whether to promote the entry of the EU as such into multilateral institutions alongside, in a transitional phase, its member states. The road ahead will take a long time and a great deal of imagination, especially in identifying, for each of the multilateral institutions, the “spark of supranationality“, as Altiero Spinelli called it, which will allow them to function autonomously, without being completely conditioned by the evolution of power relations within them. There is a criterion that can help assess the appropriateness of the solutions that will be proposed from time to time: it is the one contained in the Lisbon Treaty, where, in Art. 1, it says that the objective of the EU is the creation of “an ever-closer union among the peoples of Europe“, respectful of universal values. In our case, that of the “fourth founding act”, it would be to create an ever closer union among the peoples of the world: the only criterion that can guide the reform and management of multilateral institutions and that the world community could share.

“Europe was born in a crisis and will be forged in crises”, Altiero Spinelli used to say, convinced that European unity was “the political project of our time”.

27th December 2020 will probably go down in Europeans’ collective memory as the day when the Union, as it began distributing the vaccine to all its member countries, showed that it was capable of offering its citizens protection and acting as a united front against the virus, a common enemy which has had a devastating impact on our health and our way of life. Ursula Von der Leyen, the President of the European Commission, has stated that the vaccine will also be distributed to the Western Balkan countries (not yet members of the EU) and North Africa: this represents the first concrete step in a European foreign policy.

An institution that guarantees these “common goods” is already a state, albeit incomplete.

Faced with this huge global crisis, the European Union reacted promptly. Despite the handicap of a decision-making process that does not always allow majority voting, the EU has made clear political choices, equipping itself with the tools to face both the pandemic and the serious economic downturn generated by the lockdown.

Firstly, the prompt intervention of the ECB enabled the purchase of government bonds from the countries most affected by the pandemic. Then the Commission suspended the “Stability and Growth Pact” to allow states to go into debt to fund the first measures to support businesses and citizens; it also set up a “European unemployment scheme” (SURE) worth 100 billion euros.

But, above all, last May the Commission – which now increasingly resembles a “European government” – launched the Recovery Plan for Europe, whose name recalls the Marshall Plan (the European Recovery Program), the initiative that helped rebuild Europe after the war.   

As is known, the Plan is based on two instruments. The first is Next Generation EU, namely 750 billion euros in investments aimed at funding the recovery and, at the same time, managing the transformation of the European economy towards the energy transition and the digital revolution. The second is the increase in budget (from 1% to 2% of European GDP), and the addition of European debt securities (union bonds) to finance investments. New “own resources” for the Union are also in the pipeline, from a carbon border tax (to reduce CO₂ emissions), to a web tax (on tech giants), as well as the introduction of measures to combat tax havens and money laundering.

The Plan’s “political philosophy” is clear: to put Europe back on its feet and drive change, in the direction of the Green Deal and the digital revolution, to enable the Union to face global challenges on an equal footing with the other superpowers.  “Nation states are no longer the answer” is a sentiment shared by Angela Merkel, leader of the most important EU country, and Ursula Von der Leyen, representative of the “European government”: two women who personify the shift from national to European politics.

The Recovery Plan therefore represents a strong, united political response, which has made it possible to overcome the flaw that “hobbled” the Maastricht treaty (creating a currency without a state, as is generally said), teaming the euro with the first form of European economic policy: investments based on common resources, guaranteed by a stronger budget. In this respect, the Plan is therefore revolutionary: it marks the introduction of a European fiscal capacity, additional to and operating in parallel with that of the Member States. And all of this has been achieved without reforming the Treaties: the Union has thus strengthened its implicitly federal nature, upholding the principle that European solidarity is  possible if there is common control over the use of resources, guaranteed by common rules and institutions.

This philosophy also enabled the “compromise” reached at the end of the year, which establishes a link between the distribution of common resources and respect for the rule of law. Like all compromises, it is not entirely satisfactory, but it has allowed the resources of Next Gen EU to be linked to respect for the rule of law, removing the veto threatened by Poland and Hungary.

The objectives of the Recovery Plan are valid not only for Europe, but also the rest of the world, which has to find a cooperative, non-conflictual way of managing both the environmental crisis and the technological revolution. Europe is leading the energy transition and helping to write the rules for the digital revolution, showing people that there needs to be a “common sovereignty” over a number of global public goods, at the service of humanity.

A challenge from the Recovery Plan for Europe

The corona virus outbreak has provoked the most dramatic global humanitarian crisis in living memory. It forced a deep change in our way of living, keeping us apart from our friends and families and, most sadly, the casualties due to it keep climbing all over the world.

At the same time, the pandemic has triggered the most drastic world economic crisis of the last century. In response, central banks and governments have unleashed a series of unprecedented stimulus-packages to fight the downturn. Such measures are absolutely needed. Firstly, they provide vital support to workers, consumers and businesses, helping them to go through the emergency. And secondly, they are necessary to limit the economic scars, the lasting economic damages that persist even after the emergency-phase has finished and that limit the subsequent recovery.

But simultaneously, it is crucial to stay focused on the medium-term objective: the transition to a green and digital economy. In fighting the short-term damage caused by the pandemic, most governments have failed to subordinate the aides provided to any ecological requirements – even those given to the largest firms. It would be a terrible mistake rebuilding the economy as it was before the pandemic. Several industries used to rely on obsolete models and were already in decline: the outbreak has suddenly accelerated this trajectory. The fundamentals of our economy need to be reshaped, and we can’t afford to waste this occasion.

In fact, history is full of episodes like the one we are facing. Of course, not in the sense of recurring, widespread and highly deadly pandemics. But the economic shock generated is nothing particularly new. Over time, major events that disrupt the existing political and economic balance are quite common. Such events profoundly shape the development path followed by different countries or, more in general, by different geographic areas.

In this context, it is relevant to notice that the same initial shock can have – and usually has – very different consequences in terms of economic changes across different areas, depending mainly on the political and economic institutions which deal with it. Thus we have first to recognise that we are in the middle of such a moment, which means recognising that this tragedy must be used to push the transition toward a green and digital economy. Secondly and even more important, it is needed to put the right institutions in charge of leading this dramatic change.

The pandemic and the economic challenge are global issues and, as such, must be addressed accordingly. You can’t secure the U.S. if, say, the virus is still spreading in Mexico. Or it is useless if one part of the world cuts its emissions but the other keeps polluting heavily. This is to stress the importance of multilateralism and acting internationally in a coordinated way. Institutions like the WTO and the WHO should be given more institutional power; a world agency for the environment would also be welcomed. With the leading role of the European Union and the departure of Mr. Trump from the White House, improving the international coordination is possible.

From a pure economic point of view, a balanced and sustained recovery is achievable via inclusive institutions, capable of creating a level playing field and to encourage investments in new technologies and skills. In fact, the European Union has agreed earlier this year to a renewed institutional framework: the Next Generation EU, within a revamped EU budget. It is not just a matter of money. It is also a political turning point. In the coming years, the Union will work towards reforming the own resources system and introduce new own resources. Possible examples include a carbon border adjustment mechanism, a digital levy, the plastic tax and a Financial Transaction Tax. Moreover, the investments under the Next Generation EU will be approved and monitored by the European Commission, strengthening its political grip. These are the sort of changes required for a political federation to work properly. The declared aim of the Commission is to help the economy in the short run, but also (and mainly) to transform the economy, to drive its transition by incentivising creativity and innovation. Every economic shock brings destruction; but history suggests that often they actually bring creative destruction. It’s the politics’ responsibility to make this possible. The action of the European Union goes precisely in this direction.

A key element in moving toward a more sustainable economy will be the chemical sector, starting from the plastic industry, since it enters basically into every productive process. The research is making big steps ahead, particularly in producing basic chemicals from renewable sources. At the same time, examples abound from other industries as well. The textile sector is giving itself a series of stringent ecological parameters with the aim of limiting the emissions during the entire productive cycle. Also the agro-industrial sector is moving fast with new ideas and methods.

One of the crucial aspects will be to maintain an integrated approach to take advantage of the possible synergies between sectors and to avoid the so-called greenwashing: avoiding, for instance, the risk of simply shifting the environmental impact from one sector to another, or from one continent to another, instead of concretely eliminating it.

The objective of the European Green Deal is to make Europe a carbon neutral continent; but this goal cannot be reached at the expense of the competitiveness of the European industry. For this reason, the green revolution has to be based on the digital transformation of the economy and in general of the society. The technology is involved in all sectors and the digitalisation of processes and products is needed to gain competitiveness. In other words, the traditional economy should move toward a real smart economy.

Several examples stand out. The Ubiquitous Connectivity makes different sectors of society constantly connected to the internet; the Datafication transforms every aspect of our daily lives in data, from which useful information can be obtained; the Internet of Things, billions of objects simultaneously connected in order to provide data to be used for, say, reducing the emissions of a whole city, or helping an executive in charge of monitoring a productive process. The final goal of these – and several other – innovations is to interconnect as much as possible the physical world with the digital one, to create a smart economy and a smart society. To this end, the European Commission has proposed a new program, the Digital Europe Programme, with a budget of 9,2 billion euros for the 2021-2027 Multiannual Financial Framework.

Finally, also changing the personal behaviours will be very important. First of all, despite all the efforts we can make, the global temperature will continue to rise in the next years, before eventually we will be able to stop it. Everyone needs to adapt to a world hit by extreme natural events. The risk of low probability – high impact events must be taken more seriously.

Moreover, people need to adapt also as workers. New technologies require new skills; old jobs will be replaced by new ones. This is the concept of creative destruction that we have mentioned earlier. Even if this can create fear, especially among the low skilled workers, this is precisely how the economies should work. Moving towards more productive industries boosts the economic growth and the living standard over time. As said, it is up to the politics creating the right sort of inclusive economic institutions to minimise the short term costs and to accommodate this transition. The “Skills Agenda for Europe” will address this very important topic. Indeed, a research from Green Italy shows that companies investing in technologies and models oriented to environmental sustainability tend to be more productive. So, we are not talking about a distant and uncertain future; we already have the evidence that this direction is the right one.

As anticipated above, governing the economic change will be essential. The steps taken at European level are a very turning point. Until now, the monetary policy has been the only real federal instrument available. With the Recovery Plan, the common public debt and the new own resources, the fiscal lever is going to be introduced as well. Such common resources and the supervision of the European Commision make it possible to govern the economic change at federal level; this renewed institutional setting can activate a European economic policy, at this point in time focused on the green and digital transitions. Again, we need to stress the dramatic change the economy is going through and the importance of handling it. The political developments underway go in the right direction, since they add a genuine European fiscal capacity and the possibility to build a European industrial policy.

For the European Union the challenge is to develop the proper skills to be able to lead the energetic transition. This will show the rightness of the European integration and will allow to strengthen further the federal institutions, which is something badly needed especially in the current historical context. Not only for the correct functioning of the Europe Union itself. But also for the whole world. In the last 4 years the U.S. has turned inward and the EU has been the main advocate of multilateralism and international cooperation. Even if the hope is that America will return to a normalized politics starting from 2021, Europe should keep and reinforce its role. Now more than ever we need a world order based on a strong cooperation between the regional superpowers; the alternative is a world, at best, of isolationism and mistrust and, at worst, of open conflicts. The European Union has been able to keep at bay the populist movements in the last 2018 elections; now it can and must act for turning this tragic period in a starting point for Europe and the world.

Since the end of the Cold War, the interest of the two superpowers in the economic and political development of the African continent has steadily weakened. The new Chinese superpower has increased its involvement, but in neo-colonial form, exploiting mineral and natural resources, paid for with investments mainly in the transport network, to facilitate the penetration of Chinese goods in domestic African markets. In this period Europe has been practically absent, except in some local disputes, and it has mainly pursued its policies through bilateral relationships.

Things are changing radically with the explosion of the migration problem, now one of the main issues in political disputes between European countries. This also regards flows from the Middle-East and some Asian countries, but the main flow of migrants comes from the Mediterranean and Sub-Saharan area, with people travelling through the desert to the coast, where it is easy to find a boat to reach Europe.

To put the issue of controlling the flow of migrants into European territory into the right perspective, we must start with a brief analysis of the current state of sub-Saharan economies. From the mid-1990s, for about 20 years, most of the sub-Saharan countries saw high rates of economic growth. But since 2015 growth has slowed down, in particular for resource-intensive countries, mainly due to the terms-of-trade shock of 2014, when oil exporters faced the largest drop in real oil prices since 1970. For non-resource-intensive countries, growth has been more or less in line with forecasts. Nevertheless, on the whole, “by 2023 more than half of sub-Saharan African countries won’t see a narrowing in their per capita income gap with the rest of the world. And these countries are home to more than two-thirds of the region’s total population”[1].

In sub-Saharan Africa in 2019, income growth remained at 3.2 percent, and was estimated to rise to 3.6 percent in 2020[2]. Growth was predicted to remain strong in non-resource-intensive countries, averaging about 6 percent. If this had been the case, 24 countries, home to about 500 million people, would have seen their per capita income rise faster than the rest of the world. In contrast, growth was expected to be slow in resource-intensive countries (2.5 percent), meaning that 21 countries were expected to see a per capita growth lower than the world average. While in this setting it appears more and more difficult to generate jobs for some 20 million new entrants into the labor market every year, it must be underlined that some 40 percent of people in sub-Saharan Africa live on less than US$1.25 a day.

The current outlook for 2020–21 is considerably worse than expected and subject to much uncertainty[3]. This is due to a weaker external environment and measures to contain the COVID-19 outbreak, which has been accelerating in several sub-Saharan African countries over the past few weeks. Economic activity is now expected to contract by 3 percent in 2020, before recovering by 3.1 percent in 2021. This represents a drop in real per capita income of 4.6 percent in 2020-21, which is larger than in other regions. Across country groupings, growth is expected to fall the most in tourism-dependent and resource-intensive countries. Growth in non-resource intensive countries is expected to come to a near standstill. On average, per capita incomes across the region will fall by 7 percent compared to levels expected back in October 2019, coming close to those seen nearly a decade ago.

This outlook presents significant downside risks, particularly regarding the evolution of the pandemic, the resilience of the region’s health systems, and the availability of external financing. Policy makers aiming to rekindle their economies have limited resources at their disposal and will face some difficult choices. The region presents a large financing gap. Without significant additional external financial assistance, many countries will struggle to maintain macroeconomic stability and meet the basic needs of their people. The need for transformative reforms to promote resilience—including revenue mobilization, digitalization, and fostering better transparency and governance—is more urgent than ever.

Despite the slowdown in growth rates in recent years, the overall outlook remains promising, given that African GDP was expanding faster than the world average, and the existence of factors that will greatly help to increase the speed of economic growth in African countries. The first is rapid urbanization, strongly correlated to the rate of real GDP growth, because productivity in cities is more than double that in the countryside.

Africa has a large, young workforce, an important asset in an ageing world. An expanding working-age population is generally associated with strong rates of GDP growth. The employment of this workforce depends largely on the ability of African countries to fully exploit the huge potential of technological change. This in turn is strictly linked to a massive increase in investments aimed at creating human capital. Furthermore, Africa contains 60 percent of the world’s unused but potentially available cropland, as well as the world’s largest reserves of mineral resources.

The exploitation of this growth potential is mainly hampered by the shortfall in much needed investments in infrastructure. For instance, 600 million Africans are without electricity and lighting. The African Union has set up a continent-wide agency for electrification, which has come up with a plan to achieve 100% electrification in 10 years. Implementing this plan will require financial aid from the EU to the tune of 5 billion dollars yearly for ten years, which will provide the leverage for releasing the private funds of up to 250 billion dollars needed to fulfil the electrification plan.

300 million Africans are without access to clean water and only 5 percent of the available cropland is appropriately irrigated. But beneath the dry African soil there are reserves full of underground water: according to recent research by the British Geological Survey and University College London, the water reserves are 100 times greater than the volume of water available above ground.

The water supply could be increased by using new, technologically advanced, desalination plants. This opportunity could be exploited if the electricity required is provided through major investments in solar energy production.

Investments in water and energy, and the creation of human capital, are the first requirements for an effective African growth plan, which the European Fund for Sustainable Development should support, providing guarantees that could mobilize about 44 billion Euros in new investments. This flow of new investments would foster policies to deal effectively with the challenge of managing the increasing flow of migrants toward the European coast. But this plan has to comply with political requirements as well. One priority should be establishing political stability and security in the African countries that migration flows originate from.

In mid 2019 the total number of extra-continental African migrants was 26.5 million, i.e. 2 % of the total African population, but it should also be noted that in 2019 over 21 million African nationals lived in a neighbouring African country (up from around 18.5 million in 2015), and in the same year the number of African nationals living in different regions within the continent was nearly 19 million (up from 17 million in 2015). Looking at the ‘big picture’ of intra-African migration, policies and activities, will enable both the African Union and the European Union to formulate a comprehensively integrated, customized response[4].

Another reason for Europe’s increased interest in the future of Africa regards energy. Concerns about the issue of climate change and difficult relationships with the oil-producing countries have forced the European Union to come up with policies to progressively curb the use of fossil fuels and promote the exploitation of renewable resources. The Sahara desert is viewed as an inexhaustible source of solar energy, but exploiting this requires technological innovation and massive investments, as well as a commitment to foster security and political stability in the region.

Thus, the future of the European Union appears more and more linked to the growth – both economic and political – of African countries, with a new approach that envisages a close partnership between the two continents. This new policy not only requires many steps forward by Europe, but a new approach by African countries as well.

In the coming decades Europe is committed to greatly reducing the use of fossil fuels in order to achieve greenhouse gas neutrality by 2050, thus complying with the terms of the Paris Agreement of 2015. Clearly this reduction must be accompanied by an increase in the availability of renewable energy, and Africa is a potential source of green energy. Yet this energy will only be  available with strong investments and new infrastructure.

A Growth Plan with Africa requires full cooperation between the European Union and the African Union, and could prove to be the fulcrum of an ecological transition that will launch the two continents in the direction of sustainable development. European financial aid is unavoidable, but the initiative should remain in the hands of the African countries concerned. As General Marshall said in his famous speech at Harvard University on 5 June 1947, launching his plan for European recovery after World War II, “it would be neither fitting nor efficacious for the American government to undertake to draw up unilaterally a program designed to place Europe on its feet economically. This is the business of the Europeans. The initiative must come from Europe and the program should be a joint one”. This lesson should be remembered by the European Union now, when promoting the idea of a Growth Plan with Africa.

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[1] IMF,Regional Economic Outlook, Sub-Saharan Africa. Recovery Amid Elevated Uncertainty, April 2019

[2] IMF,Regional Economic Outlook, Sub-Saharan Africa: Navigating Uncertainty, October 2019

[3] IMF,Regional Economic Outlook, Sub-Saharan Africa: A Difficult Road to Recovery, October 2020

[4] European Parliament, Directorate General for External Policies, Policy Department, Intra-African Migration, October 2020