Welcome to EURACTIV’s weekly Economy Brief. You can subscribe to the newsletter here.

With next year’s European elections closing in and conspiracy theories about the Digital Euro flying through the ether, the European Parliament is taking an overly cautious stance, risking squandering the opportunity to build a promising piece of European infrastructure.

Attending the Digital Euro debate in the European Parliament’s economic committee on Monday (4 September) was a weird experience.

Facing the committee sat Fabio Panetta, a member of the European Central Bank (ECB) executive board, probably the most conservative of all EU institutions, given that its main three tasks are stability, stability, and stability.

But on the topic of the Digital Euro, the economic committee members interrogated him like he was a dodgy crypto entrepreneur trying to sell his latest digital casino chip.

Barring some questions that showed that the MEP had not read the European Commission’s legislative proposal or that they didn’t care, most of the points raised were sensible.

MEPs asked about what would happen to the banks if they lose the juicy profits from payment services, they asked about the costs faced by merchants if they have to accept digital euros, and they questioned the added value of the Digital Euro.

Don’t get me wrong, asking difficult questions is part of the job of any MEP, but there is a problem if all the criticism goes in one direction, in this case, towards less ambition.

Usually, the European Parliament’s role is to ask, “Why not more? Why aren’t you going all the way? Why aren’t you using the chance for a proper European solution?” This then leads to a Parliament position that is a bit more ambitious than the Commission proposal, which will then have to be defended against the less ambitious position of member states.

If no one in the Parliament is willing to stand up for a more ambitious Digital Euro, the ECB will appear like a maverick integrationist institution, a role it cannot play.

The consequence is not the relatively sensible if conservative proposal by the EU Commission or the similar design proposed by the ECB, but a Digital Euro that is so constrained by regulatory requirements that it is unusable, or as economy professor Dirk Niepelt put it in an interview with EURACTIV, “bound to fail.”

The Parliament does not need to accept the proposed design quietly. On the contrary, there are plenty of critical questions to be asked about the Digital Euro as it is offered by the EU Commission and the ECB from a more ambitious standpoint.

For example, why should the Digital Euro have holding limits? If this puts pressure on the banks to provide savers with a better deal, all the better!

Why do we need banks to organise the payment system if we can do it more efficiently with a public solution? After all, we also transitioned from relying on private ferrymen to cross rivers to building public bridges at some point. If technological progress means that the public can do it cheaper, faster and safer, then there’s no need for the private ferrymen.

Why should the ECB not be able to pay interest on digital euro accounts? Monetary policy has long been plagued by slow transmission, leading to overreaction in the fight against inflation.

Moreover, quantitative easing, the ECB’s policy to get the eurozone out of the crisis, was highly inefficient and probably increased inequality as a by-product. Direct influence on digital euro interest rates would allow for completely new ways of monetary policy.

Of course, these more ambitious Digital Euro designs come with risks, and whether they are better than the Commission’s and the ECB’s current designs is unclear.

At the very least, the European Parliament should not be in the business of saving the business model of the ferrymen. It should try to build the best possible bridge.

If nobody in the European Parliament stands up for a more ambitious Digital Euro, it will squander an opportunity to build a piece of public European infrastructure.

Chart of the week

Today’s charts of the week first announce some good news, followed by a huge caveat.

According to WTO data and a report by Institut Jacques Delors, the EU is a global leader in digital trade, exporting more digitally delivered services than the US or China.

The EU as a digital powerhouse? That is not an intuitive takeaway, given that most of the well-known digital giants are from the US.

Indeed, the picture is not clear at all. “Policymakers still have a somewhat fuzzy understanding of digital trade, both in terms of its definition and measurement,” the report states.

The fuzziness of the data might actually hide a picture that is less counterintuitive.

The second chart shows the largest European exporters of digitally delivered services according to WTO estimates for 2022. At the second place in the ranking, just below the UK, we find Ireland.

Whenever the small Republic of Ireland appears on top of an economic ranking, alarm bells have to ring. It’s unlikely that Irish internet startups have conquered the world of digitally delivered services without anyone noticing it.

It is more likely that the Irish figures mainly consist of US companies who placed their headquarters in Ireland for tax reasons.

The fact that Luxembourg, another notorious tax haven, nearly has the same export figures as France also points to something being amiss.

The figures in the second chart are not directly comparable with the figures of the first chart as the first chart excludes intra-EU trade for the EU figures, while the second chart includes intra-EU trade.

So, is the EU the world leader in exporting digitally delivered services? We simply don’t know.

You can find all previous editions of the Economy Brief Chart of the week here.

Economic Policy Roundup

EU Commission seeks better cross-border coordination of social security. On 6 September, the EU Commission proposed measures to boost the digitalisation of social security systems in Europe to facilitate coordination of national services such as healthcare providers or labour inspectorates. According to the Commission, the measures will promote the recognition of benefits across countries, support citizens’ free movement, and reduce fraud. The measures are not supported by fresh EU funds and are not binding, but Commissioner for Jobs Nicolas Schmit said a legislative initiative could be considered in the future.

Didier Reynders temporarily takes over competition beat from Vestager. As the Executive Vice-President of the Commission, Margrethe Vestager is on temporary leave to campaign for the post of president of the European Investment Bank (EIB), the current justice Commissioner Didier Reynders will be responsible for the Commission’s prestigious competition portfolio.

EU pledges support for an African green bond market. Speaking at the Africa Climate Summit in Nairobi on 5 September, the EU Commission President Ursula von der Leyen announced that the EU would help Africa develop a green bond market to attract private investment and aid the continent to finance its energy transition. The European Investment Bank and EU member states will allocate €1 billion to de-risk private investments in emerging markets, von der Leyen said.

EU lawmakers worried ‘public policy’ clause could limit cross-border parental rights. Several members of the European Parliament are pushing to delete a clause in the draft EU regulation to recognise parental rights in cross-border situations, fearing that it could be used to limit its application in conservative member states. The law, proposed by the Commission in 2022, would ensure each EU country recognises parental links established in another member state and fully recognise children’s rights across the Union, which is not always the case for rainbow families. According to some MEPs, however, a clause allowing member states to not apply the rules in case a foreign law is “incompatible with the[ir] public policy” is unclear and risks being used to avoid applying the law altogether. The regulation is strongly opposed by far-right parties and countries opposed to LGBT+ rights, such as Hungary.

Italy’s new anti-poverty scheme sparks concerns in Brussels. The Italian government is phasing out its minimum income scheme for citizens in favour of a new system aimed at boosting employment, a move monitored by the European Commission and criticised by advocates of welfare benefits. Read more.

Literature corner

Mario Draghi on the path to fiscal union in the euro zone

Hockey sticks and crosses: Images that define the globalisation debate

Additional reporting by Silvia Ellena.

[Edited by Alice Taylor]

Read more with Euractiv

Digital Euro as currently planned is 'bound to fail', warns economist

Economy professor Dirk Niepelt warns that too many financial stability safeguards might mean that the digital cannot fulfill its role as an attractive public alternative to private payment providers.