While the European Sovereignty Fund holds significant promise, there are concerns that it may not have the necessary financial means for a strong impact. The financing of the fund is a critical aspect that could determine its effectiveness and reach.
Internal Market Commissioner Thierry Breton has ruled out a new round of joint debt for financing the fund. Instead, he suggests that the fund should tap into existing Next Generation EU (NGEU) money pots. The NGEU is an €800-billion joint debt instrument dedicated to post-COVID economic recovery. However, this cash has already been committed elsewhere, raising questions about the feasibility of this approach.
Even the fund’s initial staunch supporters are now lowering their ambitions. There have been suggestions that the Sovereignty Fund could be used to buy firms of ‘systemic importance’. However, this unexpected suggestion has raised eyebrows and sparked debates about the fund’s purpose and scope.
Expanding the EU’s own resources is also a possibility, and a debate is ongoing in the European Parliament. But the bulk of cash would fall short of what the urgency of climate change requires. Plus, as it stands, the EU’s own resources would first and foremost be used to pay back NGEU debt interests, not fund new projects.
These financial limitations pose significant obstacles for the Sovereignty Fund to become an effective policy tool. They highlight the need for a robust and sustainable financing mechanism that can support the fund’s ambitious goals.
In the next section, we will discuss the future of the European Sovereignty Fund and what to expect in the coming months.
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