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INTERVIEW - Revised Green Deal may boost post-coronavirus industrial revamp in SEE

INTERVIEW -  Revised Green Deal may boost post-coronavirus industrial revamp in SEE Diliff/CC BY-SA 3.0

SOFIA (Bulgaria), May 4 (SeeNews) - A revised Green Deal may become a boon for the industrial and technological development of Southeast Europe (SEE) in the aftermath of the coronavirus crisis, prompting businesses to focus on new technologies and sustainable business models, says Radan Kanev, a Bulgarian Member of the European Parliament, the European People's Party group.

"Taking into consideration the damage inflicted by the corona-crisis, the Green Deal is a serious opportunity for an overhaul of the economy," Kanev, MEP from the Democratic Bulgaria coalition, told SeeNews in a recent emailed interview.

The moment for shock investment in new technologies when manufacturing lines are dormant anyway can hardly be better, he noted.

A potential withdrawing of the manufacture of some assets from China in the wake of the pandemic will be an additional boost for SEE, he added.

The crisis has proved that the European societies' dependency on China, and to a large extent on India as well, in the sphere of medical and sanitary equipment, medicines and starting materials for the pharmaceutical industry is a breach in the EU security in general and the national security of each individual member state in particular, Kanev said.

"In my view, this is a good occasion to review other similar dependencies that could become security breaches in the future, as well as ones which undermine the European socio-economic model without being a national security issue," he said.

In Kanev's words, the main mistake which the governments of Bulgaria and Romania had made in tackling the coronavorus-induced crisis was a consequence of misunderstanding the goal of massive economic response. 

"If significant social groups are allowed to lose their jobs and get into debt, sustaining the social systems during the ongoing crisis is an extremely difficult, even impossible task for the fisc. In their effort to protect it from pressure, the incumbents have made the fisc face a long-term challenge to which the only response is a fiscal debt spiral. I see intention for the use of  European financial support precisely for this purpose – to put social insurance on life-support systems," he commented.

"This would be another mistake, and a more dangerous one. It is still not too late to revise the policy but the price will be higher and each hour makes a difference - what is needed is a combination of a tax and insurance holiday including a write-off of liabilities due by the end of March and the end of April, and an urgent programme for direct financial incentives for the small business and households."

Following is the full text of the interview:

Q: Did the governments in the EU member-states in Southeast Europe (SEE) take adequate economic measures in response to the coronavirus crisis and were their policies in line with the EU ones?

I would take Slovenia out of this group – it is a considerably wealthier state, a member of the eurozone, its economy is integrally related to Austria's, and on the other hand, it is in the group of the countries hit harder by the viral infection. Thus, its measures are reminiscent rather of the 'Whatever it Takes' measures of [Austrian Chancellor] Sebastian Kurz.

Croatia’s reaction is somewhat similar but it shows that Croatia’s claim of belonging to Central Europe rather than the Balkans is somewhat questionable.

In Bulgaria and Romania, as it often happens, there are great similarities in the economic measures which the authorities take in response to the crisis. Both countries were slow to react, their measures remain patchy, limited in terms of scope and depth and obviously insufficient to take the first blow of the economic crisis. It is very important that we analyse the goal of government response. In practice, a global governmental consensus about the measures to 'flatten the curve', or 'The Hammer and the Dance', has formed in the management of the epidemiological crisis. The aim of these measures is to win time for the healthcare system and society to acknowledge 'the new normality’ of living with an unknown and very dangerous virus, to brace up for it, and respectively, for their healthcare systems to prepare to treat the patients, while citizens get ready for maintaining certain, or even full, social isolation, depending on the acuteness of the crisis.

Much in the same way, most European economic measures followed the Hammer&Dance logic – they include a powerful intervention by the state and the fisc in the economy so as to win time and resources for businesses and households to prepare for a crisis economy, for remote work, for new professional, manufacturing and commercial models. And most of all, not to allow large social groups to slide into a debt spiral, to be marginalised and to despair. That is why in practice all West European governments decided to go for urgent tax and insurance holidays already in the first hours of the health crisis and long before its economic implications had manifested themselves.

It would be naïve to think that the state or the EU can keep the economy running on life support systems for the whole duration of the health crisis, which increasingly likely will have an open end. However, the rigorous measures taken by Germany, Austria, Greece, Denmark (I am naming the countries that set the tone, to be followed by all the others) are securing time for preparation and adaptation.

Thus, in somewhat greater detail for the purposes of argumentation, I have answered your question. No, Bulgaria and Romania did not carry out economic policies in line with the European ones. In these countries the reaction had neither the same goal, nor the same impact.

In conclusion, I would like to stress a significant difference: In Romania the government seemed eager to provide shock economic support but turned out to be lacking the resources to do so. The cabinet's initial encouraging guarantees were not backed by actual measures. And there is an explanation for this: Romania has an interim government without a parliamentary majority which has inherited a fisc devastated by the Socialist government.

In Bulgaria, on the contrary, the economic measures are being carried out reluctantly and under strong public pressure, and they are accompanied by constant, sometimes aggressive resistance on the part of the finance ministry. And this happens even though Bulgaria has been for years a top performer in terms of savings and the government has the support of some two-thirds majority in parliament.

Q: What did they do wrong and what is the most important thing they should do to make best use of the opportunities for European financial support?

I have already partly answered this question – the main mistake, which is hard to correct, is misunderstanding what the urgent and massive economic response aims to achieve. If significant social groups are allowed to lose their jobs and get into debt, sustaining the social systems during the ongoing crisis is an extremely difficult, even impossible task for the fisc. In their effort to protect it from pressure, the incumbents have made the fisc face a long-term challenge to which the only response is a fiscal debt spiral. I see intention for the use of  European financial support precisely for this purpose – to put social insurance on life-support systems. This would be another, and a more dangerous, mistake. It is still not too late to revise the policy but the price will be higher and each hour makes a difference - what is needed is a combination of a tax and insurance holiday including a write-off of liabilities due by the end of March and the end of April, and an urgent programme for direct financial incentives for the small business and households.

Regarding the policy of strategic recovery and transformation of the economy, it is possible only within the framework of a pan-European strategic effort. However, this is the subject of another long conversation which we should definitely launch within a real and full-fledged wide public debate.

 Q: The epidemic has prompted discussions about Europe’s excessive economic dependency on China. Can SEE take up some of China’s positions in the supply chains following a review of the level of dependency on Chinese supplies after the crisis?

The crisis has proved what was obvious, that the European societies' dependency on China, and to a large extent on India as well, in the sphere of medical equipment, sanitary equipment, medicines and starting materials for the pharmaceutical industry is a breach in the EU security in general and the national security of each individual member state. In my view, this is a good occasion to review other similar dependencies that could become security breaches in the future, as well as ones which undermine the European socio-economic model without being a national security issue.

Yes, SEE and Bulgaria in particular have a great potential for production [capacity] which until now has been unwisely redirected to China.

Bulgaria can develop the textile industry, sanitary industry, light industry and pharmaceuticals on a much greater scale immediately, as of today. And in the near future it can shift its economy up the value chain in the medical industry, light technology and applied technology. This is part of the big debate on the adaptation and transformation of the economy that I have mentioned.

Q: To what extent do you expect the coronavirus outbreak to slow the full implementation of the EU's Green Deal? What are the risks and the opportunities which the Green Deal creates for SEE in the context of recovery from the crisis?

The debate on this issue has two dangerous extremes. One is “The Green Deal is dead, forget about the environment and climate, focus on the crisis-devastated industries, services and productions.” The other goes “The coronavirus is only a minor problem when compared to climate change. The Green Deal, the way we designed it, responds to all new challenges, we are acting according to plan.”

There are arguments in support of either of these positions. However, both are extreme, doctrinally restricted and ideologically charged, and in essence, in their extremeness untrue and stupid.

Taking into consideration the damage inflicted by the corona-crisis, the Green Deal is a serious opportunity for an overhaul of the economy. I will give two out of hundreds of examples: German car manufacturing is hit hard by the crisis and the consequences will be lasting. At the same time, since long before the outbreak of the pandemic, it has been suffering from a severe technological lag. Europe is lagging behind dramatically in the modern technologies of hybrid engines (already obsolete in the East), electric vehicles, etc. Yet demand in the densely populated and sensitive to pollution cities will grow continuously. Would it be wise for Germany to pour, for example, 100 billion euro into maintaining the diesel philosophy, and at the same time insist on higher taxes for Korean, Japanese and U.S. electric vehicles and hybrids? That would obviously be unwise. At the same time, the moment for shock investment in new technologies when manufacturing lines are dormant anyway can hardly be better.

Here's another example: Mass-scale summer tourism of the Ibiza and Sunny Beach type will certainly skip a whole season, which is something that most hotel owners and tour operators cannot afford anyway. But the chances for a successful season 2021 too are more than slim, it is very likely that the clients of their service will take a lasting decision to give up this type of summer vacation. Is it reasonable then for the state to allocate billions to finance the existence of a whole supply chain for this service for years when it will be renounced by tourists? Or this is the right time for investments in a new tourist model based on preservation of nature, the small local business and local food supply?

Specifically for SEE, a reasonably revised Green Deal may be a great opportunity for the industrial and technological development as an integral part of the withdrawal of certain production lines from China to the EU.

Q: The epidemic has prompted a debate on solidarity in Europe but in respect to the EU membership applicants, is the EU doing enough to show them that it is a reliable partner in hard times? Is there danger of the gap between the Western Balkans and the EU widening?

The debate, after the initial shock, is now heading in the right direction: Is it a wise solution for the EU to have no powers whatsoever in healthcare and zero budget for healthcare? If the EU’s wealth is a consequence of open borders, free movement and a single market, can we have 27 different systems for reaction to epidemics? Can the EU react to hard crises with a budget of 1% of the GDP of the member states? Can the EU guarantee our security with such a budget?  

It is already clear that these questions are rhetorical. Paradoxically, the culprits for the absence of a common health policy, for the lack of single systems for crisis response, the propagators of a small EU budget, today are accusing the EU of failing to react. These opponents include both the nationalists, who were in power in Italy until recently, and the ruling extreme left in Spain, the French extreme right, as well as influential super-national businesses which have already queued up for budget support… The crisis has shown the need for a stronger and more united EU.  And most of all, the need for a bigger common budget. Europe’s recovery requires a recovery plan financed by a bigger budget in the medium term. And the good news is that there is now a consensus about this principle.

I do hope that these conclusions cover the so called Western Balkans. I am deliberately speaking about the recovery of Europe and not that of the EU. In terms of health, as well as in terms of the environment and climate, and most of all, in terms of shedding away dangerous dependencies from China, Russia and Turkey, the Western Balkans are part of Europe.

 

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