The European Green Deal (EGD) is often touted as the one-stop solution to the myriad of problems we face in our modern times, be it climate, economy, equality, innovation and technology. Following the outbreak of the Covid-19 pandemic, EGD has now become the main tool for economic recovery at European level.
While this deal may contain important promises (but also risks), a fundamentally weak aspect of EGD is often overlooked: its funding falls short of making it a game changer.
The funding that should carry out the EGD was announced in January 2020: the Investment Plan for a Sustainable Europe (SEIP) which aims to mobilize 1 trillion euros until 2030.
In practice, it is made up of several funding pillars, starting from around € 500 billion from the EU budget which should constitute the bulk of SEIP.
It also includes Invest EU, a new guarantee fund providing guarantees from the EU budget to support investments from the European Investment Bank (EIB) and national public banks, as well as several smaller instruments like the new Just transition mechanism and the Innovation and Modernization funds.
What is on the table, however, is an undersized and wobbly investment plan, as the figure of EUR 1 trillion is unfortunately primarily a selling point and the result of creative accounting.
This is actually the amount the EU wants to get from other investors, not the amount that would actually be invested directly. This is not the first time that the European Commission has used a similar strategy, as was already the case with the investment objectives of the Juncker plan.
In particular, SEIP has a strong bias in favor of the private and financial sector. The emphasis on bankable projects and the mobilization of private resources has come at the expense of playing a greater role in pursuing transformative policy directions.
The approach of turning projects into bankable projects ignores the fact that a majority of ecological transition needs will simply not be bankable and will provide a return on investment.
The sustainable finance agenda associated with SEIP also risks strengthening the financialization of our economies, to the detriment of the real economy and worsening inequalities within and between countries.
Add to this the challenges of capturing companies and the lack of transparency and public participation in how investments are decided, and it is clear that there are several big question marks regarding the European Green Deal and what should be the objective of public finances.
What we are asking for is a different approach to EU public investment and EGD funding, an approach working for the decarbonization, de-financialization and democratization of our economies and societies.
While much attention is paid to decarbonization, the other two aspects – de-financialization and democratization – are largely ignored.
A new type of public intervention in the economy is necessary, the primary objective of which is to de-financialize the economy by gradually reabsorbing the wealth fluctuating on the private capital markets.
This is where operations backed by public funding carried out by institutions such as the European Investment Bank or funds managed by the European Commission could make the difference.
So the problem is not simply to see governments revert to using fiscal policies and public financial institutions to stimulate public investment. It’s not just about putting more money into the right investments, but also how to subordinate the remaining majority of private funding to the logic and functioning of these much-needed societal investments.
This is precisely the reverse of what happens today when European institutions use the leverage of public funding to attract significant private capital and finance managed and wealth-generating interventions only for private capital markets and not for the majority of the population.
Reclaiming private wealth for the common good is urgent, but it must be placed in renewed public investment banks – especially at local, regional and national levels – and mechanisms designed to avoid the mistakes of the past.
The funding pillar of the European Green Deal could, for example, finance cooperatives or other actors in the social and solidarity economy sector to create community banks that invest directly in their local and sustainable economies.
It is high time that the EU institutions and European governments prioritize the real economy over the financial sector, focusing investments on essential public services and goods and placing social justice at the heart of the Green European deal.
The implementation of strict social and environmental conditions to all financing provided under the Green Deal is also necessary to protect these funds against the risks of “greenwashing”.
These are prerequisites for making any public investment plan within the framework of the European Green Deal sustainable and responsible in the long term vis-à-vis public interest objectives.
If it becomes democratized and refocuses on the public good, EGD and its financing could become an important opportunity to use public money for a truly fair ecological transition that meets the needs of people and their territories. In this struggle, the reconquest of public finances has a central role to play.