Thersday, 25 November 2021
Hello Future is blue readers,
This week we are covering the reform of EU fiscal rules, a very sensitive issue touching very deeply on Member States’ sovereignty.
We’ve reached out to Jonás Fernández, Member of the European Parliament and coordinator of the Socialists and Democrats in the Committee on Economic and Monetary Affairs to get a better understanding of the current debate and obstacles for a new fiscal pact. Jonás is featured in this week’s podcast, together with Raymond Torres, Funcas Europe Director, and Carlos Carnicero Urabayen, Future is blue editorial coordinator. More info on the podcast below.
At the end of this email, you can see as usual the readings that are capturing our attention this week.
New podcast available!
The current rules were born in the 90s and, in a nutshell, they mandate Member States to keep public debt below 60% and public deficits below 3% of GDP.
Martin Sandbu from Financial Times correctly argues that “the current fiscal framework satisfies no one. Deficit countries find its discipline too constraining… Surplus countries see high debt in struggling neighbours and conclude it hasn’t been constraining enough”.
Fiscal rules were suspended last year so that Member States had fiscal margin to fight an unprecedented crisis. Now everyone seems to agree that we need a new framework and many alert that coming back to the previous rules next spring – which would trigger a strict path for public debt reduction - would be sort of suicidal for the EU’s fragile recovery.
Major investment is also needed to fund the ambitious green transition which will undoubtedly pose a challenge in terms of Member States capacity to reduce public debt, especially if they are supposed to follow the path that is currently envisioned in the current fiscal rules. A green golden rule would make sense, but this alone would not be enough to equip the EU with the right fiscal policy.
What we are reading
The EU commission begins its reflection/review of EU fiscal rules
Interesting Twitter thread by Eurasia’s Mujtaba Rahman about the main obstacles that this process will face.
The EU’s fiscal rules need more than technical tweaks
“There are signs that old suspicious over public finances between Europe’s north and south are waning”.
A green fiscal pact: climate investment in times of fiscal consolidation
In light of the current debate it’s worth revisiting Bruegel’s proposal for a green fiscal pact.
Glasgow climate pact: where do all the words and numbers we heard at COP26 leave us?
Professor of Physical Geography, Mary Gagen explores questions about where countries stand now as a result of the deals that were made.
Have a nice rest of the week!
Raymond Torres, Funcas Europe Director