DUBLIN (Reuters) -The European Union needs to revamp how it spends money to revive growth, curbing state aid and redirecting funds towards “public goods” that will be critical for future growth, Dutch central bank chief Olaf Sleijpen said on Tuesday.
European growth has been stuck at anaemic levels for years and policymakers have been debating possible reforms to revive a bloc that is quickly falling behind global peers and already badly trails on investment into artificial intelligence, a dominant theme for the years ahead.
“The EU budget is still focused on the economy of the past, and not so much on providing the public goods that are necessary for the economy of the future,” Sleijpen, one of the newest members of the ECB’s rate-setting Governing Council, said in Dublin.
“Agricultural subsidies and cohesion funds together account for more than two-thirds of the EU budget, while expenditures on research, climate, defence and cross-border infrastructure remain low,” he said.
Spending should be redirected towards building physical and digital cross-border infrastructure, which could reduce growth-inhibiting barriers within the bloc, Sleijpen argued.
This could also be done via the issuance of joint debt, but only if national spending was reduced and overall debt levels do not rise.
The bloc should also reconsider how state aid is provided to vulnerable sectors because rules have been relaxed, distorting the playing field, he said.
Rules should be enforced more strictly and targeted support should only be allowed when justified, Sleijpen added.
Other steps to improve competitiveness include deepening the single market and making sure more of household savings are invested in Europe, Sleijpen argued.
(Reporting by Graham Fahy, writing by Balazs Koranyi, Editing by Alex Richardson)
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