Catalytic Power Europe: Blended Finance in European External Action

Abstract

The global influence of the European Union (EU) has been debated in overlapping strands of literature as 'normative', 'regulatory' and 'market power'. They identify the diffusion of its rules and standards as a vehicle of European power. We argue that European power extends beyond its regulatory capacities and includes new 'catalytic' capacities in the realm of financing and network building. We analyse blended finance as an instrument of 'catalytic power', defined as the mobilisation of partners and their resources to pursue external objectives. The analysis reveals that financial leverage, the original motivation behind the tool's creation, has declined in importance. Instead, blended finance is designed to facilitate and structure cooperation with other European and multilateral financial institutions, positioning the European Commission as a central node in international cooperation and increasing its influence in this sphere. The article closes with a discussion of blended finance as a tool of catalytic power and related trade-offs.

Limitations of coordinative Europeanisation in the Just Transition Mechanism in Romania

“…IMF and World Bank), the way these are now used to enroll private sector involvement is novel and is reflected in the new literature on ‘wall street consensus’ (Gabor, 2021) and the European Investment State (Lepont and Thiemann in this SI) to which this paper contributes. Current literature like the catalytic state model (Prontera and Quitzow, 2022, 2023) misses the reliance on multi-level governance systems in the EU’s investment programs. Our paper thus contributes to the existent literature on European-funded investment programs, by showing the extent to which new financial instruments like the JTM rely on often overlooked vertical coordination between national and local authorities, as well as the horizontal coordination between different stakeholders.…”

“…Over the past decade, the EU moved steadily beyond regulatory functions. It deploys new capacities that have expanded the scope of its action, following the logic of policy layering – from regulatory capacity to a new financing role (Prontera and Quitzow, 2023) or a ‘hidden investment state’ (Mertens and Thiemann, 2019). EU policies have complemented each other (e.g.…”

Geoeconomic Power Europe: When Global Power Competition Drives EU Integration

“…With this concept, Wagner sought to refine the normative power approach by highlighting the role of bargaining amongst conflicting societal interests and values in the EU's promotion of external norms. Most recently, Prontera andQuitzow (2023, p. 1002) have argued that the EU's use of 'catalytic power' through blended finance instruments reflects 'its nature as a quasi-state entity' that lacks the authority to directly control its member states' external actions but is able to co-ordinate them through collaborative investment projects, as manifested also in the EU's internal governance. Similarly, for Laffan (2023), the EU is best characterised as a 'collective power' involving a multiplicity of actors, which reflects its 'compound nature'.…”