More than 270 academics and civil society groups have backed a manifesto calling for an overhaul of the fiscal rules of the European Union. The document says reform of the rules is needed in order to support the bloc’s climate goals.
The EU temporarily suspended the framework during the Covid crisis, and a review is now underway to assess how it should be amended once the suspension is lifted. This was due to happen at the end of 2022, although the European Commission has indicated it could be delayed further following Russia’s invasion of Ukraine.
The current rules say that national debt should not exceed 60% of member states’ GDP, while annual budget deficits should be kept within 3% of GDP. The Commission is expected to release a proposal for a revised framework in July.
The fiscal rules manifesto, published today, says the current arrangements prevent the EU from taking the necessary steps to adapt to and mitigate climate change. The backers include Olivier Blanchard, former chief economist at the International Monetary Fund, and civil society groups including Finance Watch and the European Trade Union Confederation.
“The annual green investment gap was recently assessed by the European Commission at 520 billion euros. To fill the gap, substantial public funding will be needed. The imposition of arbitrary fiscal limits make this target unreachable,” the signatories warn.
The manifesto also says that the rules must help to ensure member states’ debt sustainability, with greater attention given to national contexts, and the need to avoid a return to harmful austerity measures. It also says there must be an awareness of the risks to public budgets arising from underinvestment in climate change mitigation and adaptation.
Although some adjustments to the rules may be possible before they are reinstated, far-reaching changes could take at least two years, as they would require the approval of the European Council and the European Parliament.
The European Central Bank backed calls for reform in October, saying in a submission to the Commission’s review that fiscal policy must become more growth-friendly, and allow for significant public investment in the green and digital transitions.
The publication of the manifesto comes as EU finance ministers meet in Brussels this week. The signatories are hoping that it will help persuade member states to undertake meaningful reform.
This page was last updated March 15, 2022
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