THE STATE OF THE EUROPEAN UNION REPORT. Europe in a period of transition

THE EU NEXT GENERATION RECOVERY FUND, THE YEAR OF ITS IMPLEMENTATION 55 NextGenerationEU as an instrument to promote a change in the EU economic and productive model Similarly to what is mentioned above regarding de- veloping countries, the NGEU funds aim to be useful for green, socio-economic and digital transition of the MS that receive them. Although it is true that these three transitions were already up and running before the pandemic, the European funds intend to accelerate these on-going processes as a strategy to overcome the crisis. In fact, the long negotiation of the recovery funds brought about a transaction between the countries in the North and South of Europe, by virtue of which the former accepted transfers in favour of the latter in exchange for structural reforms. In this respect, the NGEU is not just a solidarity and cohesion fund, nor is it merely an instrument to recover the level of growth prior to the pandemic. It is an instru- ment for investment and reform with a view to a change of productive model in these countries. Just like Biden’s “Build Back Better” recovery plan, the NGEU does not intend to return to the pre-pandemic situation but take the severe covid-19 crisis as an opportunity to transform MS economies. The green transition Although the digital transition aspect was particularly developed during the pandemic, we should not forget that the NGEU puts ecological transformation at the core of its priorities. In this respect, it assigns the grea- test percentage of its funds, at least 37%, to meeting climate goals. This approach is consistent with the European Com- mission’s flagship government programme for the next few years, the European Green Deal (EGD). The EGD is a comprehensive strategy to achieve ecological transi- tion throughout the economy. It includes actions on very diverse fronts such as a new industrial policy with high potential to create employment, environmental taxation, and redirection of private investment.The EGD influences daily life in various ways such as food, transport, biodi- versity or the circular economy. Over the last year, we might highlight the approval of the Climate Law in June 2021, that protects EU climate commitments, making them legally binding. Specifical- ly, the Climate Law sets the ultimate goal of achieving climate neutrality in 2050. There is also the intermedi- ate goal (more ambitious than elsewhere in the world) to reduce CO2 emissions by 55% before 2030, taking pre-industrial levels as a reference. On the other hand, with the approval on 14 July 2021 of the “ Fit for 55 ” package, the Commission is un- dertaking a second legislative development of the EGD. This package contains twelve proposals in wide ranging fields. They include the aforementioned strengthening of the European system for emission rights and the Carbon Border tariff (CBAM). They also include energy efficiency measures related to renovating buildings or increasing the presence of renewable energies with the goal that they reach 40% in the energy mix before 2030. This package also includes proposals on aspects such as prevention of the loss of biodiversity and deforestation, promotion of correct soil use or toughening up standards relating to car emissions. Given its great scope and importance, it is expected that the Council negotiation of the Fit for 55 package will be controversial and probably one of the aspects arousing the most discrepancies related to guaranteeing fair transition. Socio-economic transformation and fair transition Both ecological and digital transition are going to have winners and losers. From there, it will be necessary to set up compensatory policies to help the most damaged sectors.