Countries prioritise research, education to avoid ‘lost decade’

Commissioner for Regional Policy Corina Creţu and Budget Commissioner Günther Oettinger, during a press conference last year. Oettinger said that the only two areas that would not suffer cuts in the next MFF are Horizon 2020, the EU's research programme, and Erasmus. [European Commission]

This article is part of our special report Looking for jobs after the crisis.

Smart spending and a focus on future-oriented priorities, such as innovation and education, will be key to create more jobs in the next decade.

There is no room for losing another decade, national and EU representatives concurred in January during a high-level conference on the EU’s next multi-annual budget for 2020-2027.

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The Hungarian and Polish governments expressed on Monday (8 January) their readiness to contribute with more money to the EU’s multi-annual financial framework after the UK exits the EU in 2019.

The Lisbon Agenda and Europe 2020 didn’t deliver their promise of turning Europe into the most dynamic and competitive region of the world.

Today’s digital revolution is driven by US-based companies such as Google, Amazon, Facebook, Apple or Microsoft. Long-standing European firms are struggling to complete their transition to the fourth industrial revolution.

In the aftermath of the financial crisis, hundreds of thousands of jobs were lost. While many have found their way back to the workplace, and the unemployment rate across the EU has fallen to 7.3%, automation could represent a bigger challenge than the ‘great recession’.

Watch out for the next crisis, gloomy Davos report tells leaders

Human development is “at risk” and the current economic recovery may be hiding the roots of the next big crisis, including persistent inequality, in particular between men and women’s salaries, the World Economic Forum (WEF) has warned in its annual Global Risks Report.

The World Economic Forum’s 2018 Global Risks Report pointed out that “systemic challenges have, if anything, intensified amid proliferating indications of uncertainty, instability and fragility.”

Against this backdrop, member states want to make their economies more competitive by investing more in innovation.

Money and priorities

In this context, the next MFF will be the key instrument to mobilise the bloc’s energies.

As German vice-chancellor and Foreign Affairs Minister Sigmar Gabriel said, the long-term budget is a political instrument “not just bookkeeping.”

“Are we spending on the right things?” he asked the audience while adding that Europe should also consider increasing its spending to cope with fast-changing reality.

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Despite positive momentum, the European economy still faces challenges in terms of low investment, youth unemployment and the social fracture growing across the bloc.

To Karel Luyben, rector of Delf University of Technology (Netherlands), the return on investment in education takes more time to appear, but “it is much more and much longer lasting”.

“The combination of education and research are the best options for long-term returns,” he told the audience of the conference.

Currently, two-thirds of the budget goes to the common agricultural policy and cohesion funds. For several countries, including Germany, the Netherlands and Austria, these are the policies of the past.

That is why some capitals call for ‘deep’ cuts on farmers’ subsidies and grants given to member states for big infrastructure projects.

Budget commissioner Günter Oettinger said that the only two areas that would avoid cuts in the next MFF are Horizon 2020, the EU’s research programme, and Erasmus.

Supporters of cohesion policy argue that this budget line, which amounted to €350 billion during the 2014-2020 period, will help to make Europe a more competitive region.

“We believe that a stronger Europe would happen only if people feel more safely or if Europe’s competitiveness is more robust,” said János Lazar, minister for the office of the Hungarian prime minister.

In order to improve the competitiveness, he said that cohesion policies represent “win-win situations” as they benefit all.

For Alberto Nadal, state secretary for the Budget and Expenditure, Cohesion is the flip side of the internal market.

“When we deregulate the markets there are winners and losers. Not everybody is going to benefit in the same way,” he explained.

In his view, cohesion expenditure is a transfer from the winners of globalisation to the losers.

“It is not worth it to create areas of productivity if not everybody is going to benefit in the same way,” he said.

The next MFF could become also a ‘stick’ to punish member states. For the time being, the ideas floated link EU funds to the fulfilment of the rule of law.

But institutions have already considered linking the EU budget to the implementation of structural reforms.

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In late 2012, a report by the Presidents of the EU institutions proposed making EU funds contingent on structural reforms.

A “strong appetite” exists for introducing such conditionality, said Lilyana Pavlova, minister for the Bulgarian Presidency of the Council.

But she warned that “we have to be very careful” if it is finally adopted, as it could be “counterproductive” if that conditionality goes against the overarching goals of the EU, for example, if it is only imposed on cohesion spending.