Conference on the Future of Europe: Time for a new European economic model

The knock-on consequences of the war in Ukraine on Europe’s economy and the warnings of the latest Intergovernmental Panel on Climate Change report underscore the need to renew the EU’s economic model and rebuild its social contract. The final proposals of the Conference demonstrate that Europe’s citizens also recognise the urgency and opportunities of such systemic change.

After two years of pandemic-induced uncertainty, Europe’s economy was finally on the path to recovery. A certain degree of optimism was permitted, notwithstanding the pressing need to meet the demands of the twin green and digital transitions. However, since Russian forces initiated a large-scale military operation in Ukraine at the end of February, a new era of insecurity and economic hardship began in Europe.

Russia’s aggression and the West’s sanctions have profoundly altered not only the EU’s policy debate but also its economic outlook. Growth forecasts will be revised downwards from previous projections. Inflation is surging and is concentrated on energy and food prices. Supply chain bottlenecks persist across the economy.

A new age of EU economic interventionism

The EU is scrambling to respond to this new, insecure context. Both COVID-19 and the Russian invasion triggered a new phase of public interventionism in the EU’s economy. Firstly, the new state aid temporary crisis framework, coupled with the extraordinary fiscal measures taken in response to the pandemic, allows member states to grant further aid to businesses.

Secondly, the EU is now fully committed to economically isolating Russia through, for instance, export and investment restrictions, and progressively phasing out its dependence on Russian fossil fuels. The Recovery and Resilience Facility provides public investments to support the green and digital transitions, which are vital for both reducing EU dependence on Russia and addressing the climate challenge.

Furthermore, the European Commission is reviewing its economic governance framework and is likely to create greater fiscal space for additional investments. Defence spending has also become a priority again, with member states already reorienting public resources to this area. This month, the Commission will map out the main investment gaps in the EU’s military capability landscape.

In sharp contrast to the 1990s narrative of free trade and retrenched state-meddling guaranteeing prosperity, peace and, potentially, democracy, a consensus for strategic autonomy and economic dynamics aligned with strategic political interests is emerging across Europe.

The Conference on the Future of Europe

On 29 and 30 April, the Plenary session of the Conference on the Future of Europe (CoFoE) adopted the 49 proposals presented by 9 thematic working groups. On 9 May, they will be submitted to the presidents of the three EU institutions. The final proposals offer policymakers valuable insights into the citizens’ uncertainties in the context of the war in Ukraine and the post-pandemic economy, as well as their hopes for the future.

The proposals clearly recognise and accept the emerging consensus among policymakers for European strategic autonomy. The citizens call for the EU and member states to reduce their dependencies in key strategic sectors like semiconductors and medical products (proposals #8.3, #12, #17). They also support increasingly aligning economic and political strategies, for example, “developing transparent quality of life indicators including economic, social and rule of law criteria, in order to establish a clear and realistic timeline for raising social standards and achieving a common EU socio-economic structure” (proposals #11, #29.1).

Nevertheless, it is also evident that the citizens expect equity and environmental sustainability to be fundamentally intertwined with the pursuit of these economic and political goals. Every objective accompanying the proposals on a renewed EU economy refers to wider societal or environmental goals. For instance, a vision of a more social Europe, the full implementation of the European Pillar of Social Rights, lifelong EU support for citizens, and strong social and gender dimensions in investments (proposals #12-16). Similar sentiments can be found in the other proposals, such as all those on the climate and environment, #9 on healthcare, and #29.1 and #30 on the rule of law.

The proposals reveal, both implicitly and explicitly, that the citizens wish to see the development of a European model of sustainable well-being underpinned by a shared understanding of what matters to them.[1]

A sustainable well-being economy

The well-being economy is constructed around the concept that public interests should determine economic policy and not the other way around. It recognises that the economy is embedded in society and nature. It looks beyond the economic measure of gross domestic product (GDP), monitoring and valuing what is most important to people: our health, nature, education and communities. It is an economic model which seeks to leave no one behind, with social inclusion and equity at its heart.

Instead of prioritising the issues that people say matter most only when they coincide with GDP growth, higher productivity or wider geopolitical strategy, these desires would become the raison d’être of our economic model. Our economy and its accompanying policies should work to maximise economic, social and environmental well-being for all.

The CoFoE garnered citizens’ insights on the EU’s long-term direction, providing insights into what people want from politicians, what they value most and what economic model they believe would help them thrive. They call for increased EU economic interventionism with people and the planet at the centre.

As such, the following actions should be prioritised:

1. The EU should unashamedly champion the pursuit of a sustainable well-being economy. Promoting a circular economy, enhancing corporate social and environmental responsibility, improving the health and well-being of citizens, guaranteeing decent wages and an inclusive labour market, reducing inequalities: the citizens’ recommendations call for a new economic model which prioritises equity, sustainability and well-being (proposals #5, #7-10, #11.2, #13-14, #32.1, #41.4). Putting these aims at the heart of EU policymaking would demonstrate that the Conference calls have been heard, as well as reflect the urgency of the climate crisis. It would also recognise the ambition (as enshrined in law) of the 8th EU Environment Action Programme of making the well-being economy a priority objective by 2030.
2. As a first concrete step, social fairness and environmental sustainability should be embedded in the reform of EU economic governance. Value-based indicators that better reflect the twin green and digital transitions and the well-being of people and the planet should be incorporated into the European Semester process (proposals #11.3, #29.1).
3. Participatory democracy must continue, with regular opportunities for citizens to define a ‘Well-Being Framework”, determine which indicators best reflect their priorities and values, and co-create policies. Citizens’ Assemblies would also be an important arena for discussing trade-offs.
4. Communication must be a two-way street, with the efforts given to listening to the citizens’ concerns and desires equal to informing them of EU policy choices.
5. Formal and regular cooperation and exchange between the EU institutions and the Wellbeing Economy Governments (i.e. Finland, Scotland, Wales, New Zealand, Iceland) should be established and maintained. This exchange would allow EU member states to learn best practices from these governments in developing and pursuing their own well-being economies. Similarly, working with the Organisation for Economic Co-operation and Development to identify internationally comparable indicators would be important for the EU to measure its impact.

Whether in response to the Conference, the Intergovernmental Panel on Climate Change, the green transition or the Ukraine war, the answer remains the same. Shifting to a sustainable well-being economy is no longer a question of ‘if’ but ‘when’. Now is the time for politicians to own this agenda and understand the strength of feeling that runs beneath it.

Building upwards from an understanding of citizens’ values and priorities – which the Conference has provided – that is accompanied by clear and open communication about the direction, we will not only succeed in tackling the multifaceted challenges currently surrounding us but may actually emerge stronger.

Francesco De Angelis is a Junior Policy Analyst in the Europe’s Political Economy programme at the European Policy Centre.

Laura Rayner is a Policy Analyst in the Social Europe and Well-Being programme at the European Policy Centre.

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[1] This sentiment is clearly expressed in the introductory text to the section on “A stronger economy, social justice and jobs”. The text was built on the citizens’ recommendations calling for a shift to a sustainable and resilient growth model: European Citizens’ Panel 1: #9, #10, #11, #12, #14; The Netherlands: #1; Italy: #1.1,; Lithuania: #3, #8.