The Fiscal Matters Coalition wants reforms to the EU’s Stability and Growth Pact to better align with national budgets, in order to achieve a green and just transition.
The group is calling for a rethink of the current reforms to EU fiscal rules being proposed by European finance ministers, which could undermine future “quality investment” in green and social priorities.
The Fiscal Matters Coalition said in a joint statement that the proposed reforms to the EU’s Stability and Growth Pact (SGP) are being rushed, and risk causing long-term socio-economic harm. They believe the reforms “should strive towards a deal on fiscal rules responding to the challenges of the 21st century”, encouraging positive investment and better alignment of national budgets to achieve Europe’s so-called “green and just transition”.
The latest draft “compromised” proposal by the current Spanish EU Presidency reintroduces “common numerical targets while disregarding the need for sufficient fiscal space for quality public investments”, the coalition explained.
Purpose-driven debt
EU governments are keen to strike a deal before the end of this year, they added, but as the “cornerstone of the EU’s economic and fiscal policy coordination”, a rushed agreement on the SGP would tie Europe’s hands for the next decade while failing to promote long-term debt sustainability.
“Not all debt is equal, debt incurred to finance the green transition pays for itself,” said Sebastian Mang, senior policy and advocacy officer at the New Economics Foundation, a coalition member.
Purpose-driven debt, he suggested, can transform economies, attract new green manufacturing, create better jobs, more efficient homes, more accessible public transport, and better public services. “Those that want to unnecessarily restrict public investments stand in the way of a speedier and more equitable transition,” he added.
Achieving targets
Member States could also struggle to reach their climate, employment and social targets, the coalition added, thus undermining the resilience of European economies and societies. Speaking with one voice on the matter, the nine co-signatories represent a range of social, environmental and economic interests, and include the European Anti-Poverty Network, European Youth Forum, New Economics Foundation, European Environment Bureau, and European Trade Union Confederation.
Broad concern is levelled at numerical targets acting as “common safeguards” and an over-emphasis on defence spending at the expense of other EU objectives, as well as the need for proactive and purpose-driven investment towards achieving the EU’s agreed climate, social and economic objectives.
“Europe faces serious environmental, economic and geopolitical challenges requiring bold reforms and significant public investment,” noted a new report by Finance Watch, another coalition partner. “Out of ill-informed fears of financial markets’ reaction to increased public debt, policymakers are building the new European fiscal rules around arbitrary debt limits, neglecting the positive impacts of qualitative public investment,” it stated.
The coalition further believes the reforms lack incentives and additional assessment criteria supporting “quality investments” in sectors and ventures that “do no significant harm to the climate and environment”, and that there is no clear mention of the role of social partners and other stakeholders, no doubt including impact investors, in the drafting of national plans.
“We are concerned that these proposals could undermine the positive effects of the Recovery and Resilience Facility, pull the brakes on the needed transformation of our economies and societies, and let people down at a moment when they need more than ever to be protected against recurring shocks,” the organisations noted.
But according to the Economic and Financial Affairs Council (ECOFIN) of EU finance ministers, their reforms are needed to boost fiscal discipline, credibility and confidence in increasingly cyclical and challenging times. The new economic governance framework will improve the effective coordination of economic policies and multilateral budgetary surveillance, speed up and clarify the implementation of excess deficit procedures, and streamline Member States’ budgetary frameworks.
Aiming for a deal by the end of the year, the ministers are expected to meet again late November to discuss the new draft as the basis for negotiations with the European Parliament.
