Could Biden’s Infrastructure Plan Offer the EU a Benchmark for Digital Investment Packages?

Though it has been less than a year since the European Commission first unveiled its historic, €750 billion recovery package of loans and grants to lift the European Union out of a COVID-induced economic crisis, the narrative surrounding the “Next Generation EU” plan has shifted in the run-up to a deadline for EU member states to submit their national recovery plans for approval at the end of this month.

When the Commission first presented its stimulus plan last May, analysts and media outlets hailed the EU’s “groundbreaking stimulus” and its ‘Hamiltonian’ willingness to finally break its “bond taboo.” More recent coverage of Next Generation EU, however, has focused on growing concern over bureaucratic and legal hurdles to the disbursement of funds. On the other side of the Atlantic, and in contrast to the concerns being voiced in Europe, a new administration in the United States has used its first few months in office to push through a $1.9 trillion “American Rescue Plan,” immediately followed by a $2 trillion infrastructure spending package now under consideration by Congress.

President Joe Biden’s “American Jobs Plan” is an imperfect foil for Next Generation EU, as it covers not only physical infrastructure but also social and labour reforms that are already the norm across Europe. Even so, key planks of the American plan could offer a useful point of reference for European governments now deciding how to spend their respective allotments of the European recovery funds – perhaps none more so than digital infrastructure, whose importance has become painfully apparent over the course of the pandemic.

$100 billion, €150 billion

President Biden’s infrastructure plan dedicates fully $100 billion to digital infrastructure, calling broadband “the new electricity” and formulating the goal of bringing “affordable, reliable, high-speed broadband to every American.” The plan admits plainly that a deep digital divide, falling across racial and economic lines, has exacerbated existing inequalities and compounded the impact of COVID-19 on minority and marginalized groups. Critically, it defines broadband Internet access as basic infrastructure, imbuing it with the same level of urgency as access to electricity and clean water.

Next Generation EU speaks to Europe’s comparable digital divide in similar terms, though with somewhat less clarity on the exact amount of investment the EU and its member states will dedicate to closing it. In her maiden State of the European Union speech last September, Ursula von der Leyen, the European Commission president, insisted on the need for a “green and digital” transition that lays the groundwork for “Europe’s Digital Decade,” promising 20% of the funds from Next Generation EU would go to digital investment. That equates to roughly €150 billion of the total €750 billion package, not counting the €149.5 billion allocated to the “single market, innovation, and digital” as part of the 2021-2017 Multiannual Financial Framework – Europe’s long-term budget for the next six years.

The numbers put forward sound impressive, but are they enough to meet the needs of the hundreds of millions of Europeans and Americans currently left on the wrong side of the digital divide? While some U.S. technology experts wonder whether Biden’s plan is bold enough to overcome a policy challenge that has bedeviled American presidents going back to George W. Bush, the latest findings in Europe indicate the pressing need for the Commission and member states to think just as big.

According to a recent study from the European Telecommunications Network Operators Association (ETNO), EU telecoms operators would need to dedicate €300 billion in investment, split between fixed Internet and mobile, to achieve full 5G coverage and gigabit broadband speeds. The ETNO report makes clear that reaching that level of investment will require substantial financial support from policymakers in order to facilitate the rollout of 5G and fibre to underserved areas.

Digital investments which pay for themselves

As ETNO points out, the economic benefits Europe can hope to gain from this level of investment are substantial. Per its findings, universal access to high-speed Internet would drive the creation of 2.4 million new jobs, as well as furthering both planks of the EU’s green and digital policy priorities for the next decade. The association indicates this level of coverage could “generate an annual increase of €113 billion in GDP” over the next four years, while also cutting Europe’s carbon emissions by 15%.

In focusing on the need for digital investment in her rhetoric surrounding Europe’s economic recovery, Ursula von der Leyen is echoing the definition of digital infrastructure put forward by President Biden, but she is also sending a clear signal to European governments whose recovery plans she will soon review. The actual level of commitment demonstrated by the EU’s 27 member states, however, could vary, even with the 20% benchmark set by Brussels.

Fortunately, early indications show the EU countries most in need of digital investment are also putting forward the most ambitious plans to prioritize it. In Italy, for example, Prime Minister Mario Draghi has altered the draft recovery plan he inherited to dedicate 60% more funding to “ultra-fast networks,” increasing planned investment from €4.2 to €6.7 billion as part of a broader, €49 billion digitalization package. Given Italy expects €209 billion from the €750 billion package, Draghi’s plan also well exceeds the 20% benchmark set by Brussels.

As the largest recipient of EU recovery funds, Italy is thus setting an important standard as other national plans emerge in the days to come. Given the recent constitutional and jurisdictional challenges which have arisen for the disbursement of the Next Generation EU package, however, the EU could soon find itself lagging behind the U.S. in turning its promises of digital transformation into concrete reality – missing an opportunity to narrow the transatlantic digital divide, even as it tackles its own internal barriers to connectivity.