Wednesday, 25 august 2021
Hello Future is blue readers,
I hope your summer is going well.
We’re back today with our newsletter with plenty of insights that can hopefully help you navigate some of Europe’s key economic debates.
We start the new course with a video interview about the Fit for 55 Commission proposal, the legislative roadmap to trigger a green transformation in Europe and meet the target of cutting greenhouse emissions by 55% in 2030. Our editorial coordinator Carlos Carnicero Urabayen has interviewed Lara Lázaro, Senior Analyst at Elcano Royal Institute. More on this below.
We’re also featuring two new papers that we have recently published in Funcas. The first one covers the strengths and challenges of Spain’s recovery plan and is signed by Miguel Otero, Senior Analyst at Elcano Royal Institute, and Raymond Torres, Funcas Europe Director. The second paper analyses the ECB’s new strategy and is written by Iain Begg, Professorial Research Fellow at LSE and Funcas Europe.
As usual see at the end the readings of the week, this time focusing on the EU green agenda.
The Commission’s Fit for 55 proposal is indeed a broad package, with hundreds of legislative pages covering the creation of a new EU emissions trading system (ETS) for buildings and road transport, a bold restructuring of energy taxation, renewed energy efficiency targets, the introduction of a carbon border adjustment mechanism and revised CO2 emission standards for new cars.
In our video interview with Lara Lázaro, we analyse some of these aspects, with emphasis on the controversial social dimension that this process will entail, the main obstacles that will emerge during the complex negotiations with the Council and the European Parliament among other questions.
Because Europe is paving the way in the world legislating on climate change it feels as a if other countries and regions will keep a close eye to see what they can learn for their own green journeys.
Spain’s recovery plan: strengths and challenges
Spain is one of the countries which has most to gain from Next Generation EU, the key European-wide blueprint intended to kick-start the recovery from the Covid-19 crisis. For decades, particularly since the debt crisis of 2010, many of us demanded a comprehensive reform package to modernise the economy and tackle social deficits. Such a plan has now been formulated and was endorsed by the European Commission on June 16.
Yet, making this opportunity to transform the economy a reality will be a titanic challenge, in terms of both Spanish and European policymaking.
New era, new strategy: the ECB’s revised approach to monetary policy
On 8 July 2021, the European Central Bank revealed its revised monetary policy strategy. The previous strategy had been in place for eighteen years and even then had not changed much from the original strategy agreed in October 1998, just prior to the launch of monetary union. A review to be concluded by the end of 2020 had been announced in January 2020, but was extended in April 2020, because of the pandemic, until the second semester of 2021.
Profound economic change has reduced the scope for the ECB ‘and other central banks to achieve their objectives by exclusively relying on changes in policy interest rates’. These changes are diverse: an ageing population, the legacy of the global financial crisis, digitalisation and new forms of globalisation. The statement also draws attention to the threats from climate change.
“The ECB’s monetary policy strategy has undoubtedly evolved markedly from the relatively straightforward approach to policy decision-making adopted when the euro was launched, with its strong emphasis on price stability. But the new monetary policy strategy also bears the hallmarks of the compromises needed for it to be unanimously agreed by the Governing Council”, notes Iain Begg.
What we are reading
Sustainable recovery tracker. Monitoring progress towards sustainable recoveries from the Covid-19 crisis
Interesting initiative tracking how sustainability is being part of the recovery plans by countries hit by Covid.
10 key policies in Brussels’ plan to slash emissions
Politico has done a good overview of the key pieces of the Commission’s legislative proposal.
Fit for 55 marks Europe’s climate moment of truth
Without this legislative package, Europe would only achieve 60% emissions reduction by 2050.
A 3°C world has no safe place
The extremes of floods and fires are not going away, but adaptation can lessen their impact.
Have a nice rest of the week!
Raymond Torres, Funcas Europe Director