The search for flexibility and recognised effectiveness

The European Union (EU) is currently confronted with developments that could have deep impacts on our societies and policies. Yet the EU’s Multiannual Financial Framework (MFF) – which defines the size and aim of the EU budget over a certain period of time – has difficulties in overcoming its inflexibility and ensuring best value in relation to shifting priorities. One important step that could modernise the MFF would be to improve the use of effectiveness assessments in relation to EU spending.

In 2003, André Sapir and colleagues famously referred to the MFF as a ‘historic relic’ with expenditures, revenues and procedures being ‘inconsistent with the present and future state of EU integration’. Although the MFF has improved since then, it continues to suffer from discrepancies between stated priorities and actual spending. EU finances risk becoming increasingly reliant on funds and instruments outside the MFF ceiling because existing programmes are hard to change. Moreover, doubts about the effectiveness of the MFF remain. With European integration having moved far beyond the level of technical harmonisation of the internal market, the EU budget, arguably, needs more flexibility to respond to current geopolitical and societal challenges and investment needs. As political discussions on the next MFF – the current MFF runs from 2021 to 2027 – are starting, this report discusses avenues for realigning expenditures to changing EU priorities and to unforeseen challenges and crises.

In order to enhance flexibility suitable procedures are required that would lead to political decisions based on accurate assessments. Furthermore, better methods are needed to communicate potential – and possibly painful – shifts in priorities to the broader public. In order to develop such procedures, thorough analysis and discussion are needed on the effectiveness of EU programmes and the use of effectiveness assessments in redefining political priorities.

This report therefore relates the concept of European added value – defined by the Commission as ‘the value resulting from an EU intervention which is additional to the value that would have been otherwise created by Member State action alone’ – to mechanisms to better respond to new situations. One of the questions this raises is whether the current (multilevel) systems for assessing European added value are able to offer the timely information needed for flexibility. Given the workload involved in performance assessments, and given the importance of national ownership of reforms, further analysis is needed of the role of the European Court of Auditors (ECA) and its interactions with its national counterparts.

Recommendations

1. Any shortening of the MFF’s duration could improve the EU’s ability to respond to changing priorities. Yet rather than focusing on the length of the budget cycle – a discussion that is ongoing – it is advised to focus instead on the length of programmes under the MFF (some may run for three years, others for ten)
2. Flexibility can be explored through working with sunset clauses – meaning that programmes cease to be effective after a specific date unless further action is taken. The use of such clauses should be tied to requirements for independent assessments of the European added value before decisions on prolongation are taken. This may help to sharpen political discussions on reprioritisation.
3. The financing of the MFF via the national contributions, based on a specific percentage of gross national income (GNI), is a fair and efficient foundation for the EU budget. The GNI principle also ensures that money is scarce: priorities have to be matched with the existing contours of the EU budget. This serves the efficiency of the budget and helps to focus attention on EU added value (the effectiveness of the budget).
4. A fixed percentage of GNI could help to recommit to the scarcity principle in the budget and could help to prioritise expenditure in line with EU objectives. More important than the actual amount of this percentage, however, is whether decisions on the selection of programmes are based on effectiveness assessments. The GNI contribution could possibly be increased if linked to a deeper use of independent effectiveness assessments.
5. Assessment of the European added value of the EU budget demands a reconsideration of the current audit mechanisms in terms of their timing, lessons learned, and subsidiarity-based ways of working when it comes to pan-European assessments of effectiveness.
6. Provided that independent assessments and their use are improved, the European perspective in the MFF could be further reinforced through more fundamental reforms such as introducing Qualified Majority Voting (QMV) in the Council in revising the MFF and extending the powers of the European Parliament through co-decision in the adoption of the MFF.

These actions would result in a reform package aimed at strengthening European added value (and hence flexibility) combining a fixed percentage of GNI and effectiveness assessments of spending before political decisions are made on prolongation of programmes. Given the starting point that money is scarce, this package will produce considerable political heat over the use of the EU budget. This heat can be considered as part of normal politics regarding budgets.

Such reforms will involve serious discussions and demand considerable time. It is nevertheless worthwhile to put them on the agenda to explore new directions in the move away from the current inflexibility and juste retour. Juste retour – which implies the net budgetary balance that simply compares a member state’s financial contribution to the EU budget with the money that flows back into the country – is a misleading indicator of the benefits of EU spending. Rather, this reform package would support assessments-based budgetary decisions that contribute to the European added value of the budget.

Authors

Adriaan Schout, Senior Research Fellow at the EU and Global Affairs Unit of the Clingendael Institute

Saskia Hollander, Senior Research Fellow at the EU and Global Affairs Unit of the Clingendael Institute

Good Fear, Bad Fear: How European defence investments could be leveraged to restart arms control negotiations with Russia

Europeans have a stake in reinvigorating the arms control regime in Europe and bringing Russia back to the negotiating table. They cannot afford to rely and wait on the United States. The brief offers investments that Europeans can make to incentivise Russia to discuss nuclear warhead ceilings, delivery systems, and transparency.

The authors

Paul van Hooft & Davis Ellison - The Hague Centre for Strategic Studies (HCSS)

Paper series - Europe in the Indo-Pacific Hub

Analysis of and Recommendations for European Naval Presence in the Indo-Pacific Region

It has come under our observation that the world’s economic and political centre of gravity continues to shift towards the Indo-Pacific with China playing a dominant role in areas such as trade, military, and technology. Another evident observation is that American supremacy has declined relatively in the region. These changes pose a new challenge for most European countries whose economic future and geopolitical relevance are inextricably linked to developments in the region.

The “EU Strategy for Cooperation in the Indo-Pacific” could be launched as an official strategy in 2021.

The authors

Chung Sam-man

Edited by Paul van Hooft - The Hague Centre for Strategic Studies (HCSS)

A policy framework

Rival states increasingly use hybrid tactics to influence democratic processes and exploit the vulnerabilities of their opponents. As a response, Western governments have progressively enhanced their situational awareness and developed capabilities to minimise damages from hybrid threats. In addition, they have also started to respond proactively to hybrid threats by implementing a range of policies to not just increase resilience and bolster defence but also to shape the adversary’s behaviour through deterrence measures. However, deterring hybrid aggressors remains a difficult task.

Therefore, this new HCSS report by Mattia Bertolini, Raffaele Minicozzi and Tim Sweijs provides a set of non-technical policy guidelines for a counter-hybrid posture for small and middle powers (SMPs) that explains how core good practices of cross-domain deterrence can be developed, applied and embedded into policies and practice. The report focuses specifically on active measures associated with deterrence by punishment to provide policymakers with useful insights to craft proportional and effective strategies to deal with actors operating in the grey zone. It also describes the steps needed to manage escalation and anticipate potential second- and third-order effects. Importantly, in conjunction with a counter-hybrid deterrence posture, positive reassurances and incentives should be communicated to the adversary to encourage good behaviour.

A five-stage response framework is set forth consisting of

• (i) the Preparation Stage;
• (ii) the Detection & Attribution Stage;
• (iii) the Decision-Making Stage;
• (iv) the Execution Stage, and;
• (v) the Evaluation Stage.

These stages are further subdivided into ten distinct steps, each including specific actions. The proposed response framework offers practical guidelines to develop, apply, and embed good core practices of cross-domain deterrence into an effective counter-hybrid posture.

The feedback loop of the five-stage, ten-step response framework. Created by Assistant Analyst Ella McLaughlin.

Authors

Mattia Bertolini, HCSS

Raffaele Minicozzi, HCSS

Tim Sweijs, HCSS

The role of the Joint Expeditionary Force

Russia’s war in Ukraine has fundamentally changed the international order that is based on norms and values of state sovereignty and international law. While the Balkan wars in the nineties were the result of internal turmoil leading to the collapse of Yugoslavia, the Russian-Ukrainian armed conflict marks the return of large-scale interstate warfare in Europe for the first time since the end of the Second World War. A year after the Russian invasion was launched on 24 February 2022, valuable lessons can already be drawn for the characteristics of modern warfare. The conflict has shown – both in the run-up to the invasion as well as after the start of the war – that non-military aspects are part of Russia’s strategy. Well-known examples are the abuse of the European ‘oil and gas dependency’ on Russia, the spread of disinformation, cyberattacks and the channelling of refugees and migration flows. What these means have in common is that they are aimed at undermining the unity of the West and destabilising their societies and democracies. This very complex set of hybrid threats raises new questions on how to respond to them, as the hybrid domain requires the involvement of many different actors at the national and international level: from various ministries and even private companies (such as the energy sector) to the EU and NATO.

As hybrid challenges have become an integral part of modern conflict, the question has arisen what kind of role should be laid down for the armed forces. Hybrid challenges are very often of a transboundary and non-military nature. Therefore, they have to be addressed primarily by civil actors. But in addition, the military can also play a role in countering hybrid threats, and this raises the question of the role of multinational (military) formats such as the Joint Expeditionary Force (JEF). The JEF is a multinational military formation of northern European countries with the United Kingdom as the lead nation. Since 2019, the JEF has increasingly focused its activities on the hybrid domain. The war in Ukraine has been a catalyst for increased cooperation in the JEF context at the political, policy and military operational levels. The Russian threat, both physically (conventional forces) and virtually/digitally, has become the main focus of attention. It is in the latter category of threats that the JEF Nations are struggling with the question of what its role should be.

This report explores the possible role of the JEF in hybrid conflicts and how cooperation in the JEF can be attained. The first chapter addresses the role of military forces in responding to hybrid threats and what the JEF has realised in this context so far. Particular attention will be given to the challenges of but also the opportunities for connecting military activities with those of non-military actors. The second chapter focusses on the roles of NATO and the EU in the hybrid domain and how the JEF could relate to the efforts of these international organisations. The potential impact of the future NATO membership of Finland and Sweden – both JEF Participating Nations – is also addressed. The third chapter zooms in on the potential of the JEF’s role and functions in the hybrid domain and how this should be implemented. The growing political character of the JEF cooperation is also addressed. The report ends with a list of conclusions and recommendations for the Netherlands.
The methodology used for this report consists of a mix of literature research and a series of interviews with government representatives and members of think tanks in a selection of JEF Nations as well as with staff officers at the JEF Headquarters, at the NATO Headquarters and at EU institutions. These interviews were held under the application of the Chatham House rule. The authors are grateful to all interviewees for their valuable contributions.

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Authors

Dick Zandee, Head of the Security Unit at the Clingendael Institute

Adája Stoetman, Research Fellow at the Security Unit of the Clingendael Institute

What is the state of economic convergence in the euro area? And will the redefinition of the Stability and Growth Pact result in a more effective policy for achieving convergence? A common currency, together with the four freedoms, was assumed to lead to economic convergence. This Clingendael Report reviews the state of convergence in the euro area by focusing on nominal, real and institutional convergence. Despite a range of policy initiatives and monitoring systems, convergence has not been achieved neither in terms of monetary and economic performance nor of the quality of governance at the national level. Despite some major successes in convergence, welfare has continued to diverge in some countries and differences in debt levels have increased up to the point of threatening the - economic and political - coherence of the euro area. Public spending also varies considerably while higher public spending does not ensure higher growth levels. The paradoxical situation has arisen in which countries that (drastically) reduced debt levels performed better in terms of growth and reduction in unemployment.

Using comparative economic data for the more than 20 years since the introduction of euro, the Report among other things reaches the following conclusions:

• Upward convergence has been successful in among others Ireland and in East-European member states. These countries witnessed relatively high growth while debts were reduced. Portugal managed to bring down unemployment during the past years. Yet, a limited number of member states continue to struggle with debts, growth, and attracting investments.
• Trend analysis shows that European investment funds have failed to make a difference. Major benefactors of EU investment funds in Southern and Eastern Europe show diverging growth patterns. Ireland and East-European countries succeeded in terms of catch-up growth whereas Southern countries lagged behind. Further study is required to explain the differences in convergence and its relation to public investment.
• Contrary to the general impression that fiscal consolidation has hampered growth, we find that the countries that did cut expenditure also achieved relatively high growth levels, were able to attract investments, and managed to reduce unemployment. By implication, the notion of investment deficits in eurozone countries needs to be re-examined.
• Also in national federations with explicit stabilization mechanisms, such as the US and Germany, convergence is hard to achieve. Hence, it is probably more important to accept divergence while preventing that stability of the monetary union is undermined. Convergence is not a necessary condition for the economic stability of a monetary union as long as public debt levels do not cause negative external effects large enough to jeopardize the stability of the system.

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Authors

Adriaan Schout, Senior Researcher, Institute Clingendael & Professor European Public Administration, Radboud University

Arthur van Riel, Senior Research Fellow, Netherlands Scientific Council for Government Policy

How strategic tech cooperation can reinvigorate relations between the EU and India

In an era of multipolarity, India – expected to become the world’s most populous nation soon – will be a significant geopolitical player. This necessitates European Union (EU) member states to shift their policies to engage one of the world’s largest consumer and industrial markets.

Strategic clarity and a shared narrative

In the current international and geopolitical context, there is ample reason for the two sides to deepen their ties further. Strategic clarity about the objectives and benefits of closer ties will help build a clear narrative that will steer policymakers and other stakeholders in the desired direction, towards implementation.

The EU and its member states are investing in economic resilience and open strategic autonomy. A key question is therefore: can India help the EU move closer towards strategic autonomy – more specifically, reduce EU dependence on China?
India is seeking to promote its own manufacturing and production capabilities through its ‘Make in India’ campaign, which seeks to diversify existing value and supply chains that currently often rely on China. A key question for India is: can the EU help India to move closer towards strategic autonomy – more specifically, reducing Indian reliance on Russia?

Military technologies and critical technologies

Set against this context, this Clingendael Report investigates the role that technology can play in deepening and broadening the relationship between India and the EU – and the Netherlands in particular. Particular attention is paid to (1) military technologies; and (2) critical technologies and supply-chain restructuring (semiconductors, batteries, data, etc).

Opportunities to enhance EU–India ties are analysed along three courses of action: 1) ‘protect’: keeping out unwanted influence; 2) ‘promote’: using innovation and commercialisation; and 3) ‘regulate and shape’: using regulatory frameworks (and standards, for example). In each of these three areas, joint action with India is possible. The EU-India Trade and Technology Council (TTC) will be the natural venue to pursue these opportunities.

The insights of Indian and European experts in the field are given in six stand-alone chapters, preceded by an introduction and followed by concluding analysis by the Clingendael editors.

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Authors

Vera Kranenburg, Research Fellow at the Clingendael's EU & Global Affairs Unit and the Clingendael China Centre

Maaike Okano-Heijmans, Senior Research Fellow and Lead of ‘Geopolitics of Technology and Digitalisation’ programme at the Clingendael Institute

This report is edited by Vera Kranenburg and Maaike Okano-Heijmans of the Clingendael Institute, with contributions by Indian and European experts.

Towards a European Digital Technology Stack

In recent years the European Union (EU) and its member states hesitantly embarked on a new and ambitious path towards what came to be called ‘digital and technological autonomy’. This paradigm shift involves a turn away from the market-based, open economy thinking that has dominated in European policy circles in recent decades. The new direction is towards a geostrategic, more closed economy thinking, with a shift from a focus on trade to technology.

Tech capability defines world leadership

Policies and instruments are being devised to secure public interests in the digital domain and to be resilient in an interconnected world wherein technological capability defines world leadership. This ranges from investing in telecommunications security and trusted connections, to preventing Big Tech from becoming too powerful and taking responsibility for misinformation online; and from ensuring a secure supply of the natural resources needed for microchips and batteries, to investing in digitally skilled citizens and clean and green technologies for a sustainable future. Europe’s aim is to cooperate with partners, but to act based on own insights and choices.

Clarifying interests and concerns

This report introduces the Digital Technology Stack (DTS) as an analytical framework to analyse the interests and concerns that inform Europe’s quest for digital and technological sovereignty . It considers instruments and policies in the eleven layers of the stack. The DTS is a combination of hardware and software technologies, as well as services, that are ‘stacked’ on top of each other to make a device or service work. Digital sovereignty is about having a choice at each layer of the Stack.

Ultimately, the EU and its member states need to develop a balanced approach to digital and technological sovereignty that incorporates both ‘promote’ and ‘protect’ actions, and that is agreed and supported by all government institutions. While the EU and its member states have in recent years invested in defensive action – implementing more stringent investment screening, export controls and an economic coercion instrument – policies to strengthen Europe’s own technological superiority and economic competitiveness in the digital economy are still lagging.

Digital sovereignty concerns us all

Better understanding among policymakers in all ministries/institutions is needed of the interconnections and the trade-offs among the many issues involved – ranging from stable and secure supply chains and semiconductors to competitiveness in the digital economy and internet governance.

In this age of rapid technological developments, digitalisation and global power shifts, digital sovereignty concerns us all. Improved understanding of this will contribute to improved policymaking and, ultimately, to greater EU unity, strength and resilience – all prerequisites for digital and technological sovereignty and, ultimately, for European strategic autonomy

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Authors

Maaike Okano-Heijmans, Senior Research Fellow and Lead of ‘Geopolitics of Technology and Digitalisation’ programme at the Clingendael Institute

An analysis of China, Russia and the United States

Climate change is one of the most pressing challenges of the present and the future. Rising temperatures and sea levels, as well as extreme weather events are manifestations of climate change that also influence military capabilities. Increased attention for the climate change-security nexus is visible both at the national and the international level: nationally through the incorporation of climate change in security strategies and internationally through incorporation in important strategic documents such as the EU’s Strategic Compass and NATO’s Strategic Concept.

Given its transnational nature, governments around the world have a shared responsibility to face climate change. A particular role is laid down for the global powers, China, Russia and the United States, given their position in the world. It is, however, questionable whether the global powers’ interests align. They differ in their approaches to address climate change, and even more so in their views on how it affects the armed forces. China and particularly Russia are more reluctant towards depicting climate change as a matter of international security. This is for example visible in international forums, such as the UN Security Council. In contrast, in the US, support for climate action is subject to political preferences, but climate related security risks are widely recognised within the defence establishment.

This report reviews various aspects of the relationship between climate and security, with a particular focus on the military. It discusses the role of climate change in a country’s security and defence strategy and, vice versa, the changing tasks and deployment of the armed forces in response to climate change, the effects of climate change on military infrastructure, and measures to realise a greener defence sector.

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Authors

Adája Stoetman, Research Fellow at the Security Unit of the Clingendael Institute

Dick Zandee, Head of the Security Unit at the Clingendael Institute

Ties Dams, Research Fellow at the Clingendael China Centre

Niels Drost, Junior Researcher at the Clingendael Russia & Eastern Europe Centre and the EU & Global Affairs Unit

Louise van Schaik, Head of Unit EU & Global Affairs at the Clingendael Institute

Emerging Disruptive Technologies in an Era of Great Power Competition

Emerging (and) disruptive technologies (EDTs) play a critical role in generating economic prosperity. But they also generate a bevy of challenges. International cooperation is therefore required but severely hampered by the fact that access to and control over EDTs is increasingly considered to be a zero-sum game. A previous HCSS study considered this phenomenon under the label of ‘techno-nationalism’. The current report builds on this study and updates and extends its recommendations.

The authors

Hugo van Manen, Stella Kim, Adam Meszaros & Michal Gorecki - The Hague Centre for Strategic Studies (HCSS)