The debate on the Stability and Growth Pact is now gaining pace again. Participants at a webinar, organised by AK EUROPA and ÖGB Europabüro, discussed the weaknesses of the existing fiscal rules and outlined possible reforms. It is essential to adapt the Stability and Growth Pact in order to enable large-scale investments for a socio-ecological transformation.
There are signs that the EU has learned the lessons from the austerity policies following the 2008/09 financial and economic crisis. The current Covid-19 crisis saw the fiscal rules being temporarily suspended. The NextGeneration EU Programme focuses on investments to overcome the current crisis instead of again imposing rigorous austerity policies. It is also planned to reopen the debate on the reforming of the Stability and Growth Pact (SWP) in autumn, which had been put on hold due to the pandemic. Therefore, a group of employee organisations, civil society organisations and think tanks have initiated the action week Fiscal Matters’, where a number of events point out the necessity of reforming the Stability and Growth Pact. Both AK EUROPA and ÖGB Europabüro participated in this action week by hosting the online event “Reform of Fiscal Rules – Lessons Learned?”, which took place on 29.09.2021.
In his keynote, Achim Truger, Member of the German Council of Economic Experts, addressed the inadequacies of the existing fiscal rules. He criticised the arbitrary and insufficiently flexible debt and deficit limits within the Stability and Growth Pact as well as the lack of a Golden Rule of Public Investment. Furthermore, the pro-cyclical nature of the fiscal rules would be counterproductive, in particular during recessions. Not least, Truger criticised the complexity of the rules, the lack of transparency as well as the democratic deficits of the Stability and Growth Pact. In this sense, Truger proposed reform measures for the Stability and Growth Pact such as the introduction of a Golden Rule of Public Investment, in order to enable the funding of investments through deficit financing. Truger voiced optimism, as from his point of view the Stability and Growth Pact could be reformed without amending the European treaties which would thus not necessarily require unanimity among Member States.
Following the keynote, three panellists voiced their opinion. Nacho Álvarez, Spanish Secretary of State for Social Rights, pointed out that the main problem was not as much the institutional design of the Stability and Growth Pact, but rather a false understanding regarding the functioning of the economy, on which the Stability and Growth Pact is based. Hence, what is needed is a fundamental discussion and revision of both economic governance and underlying economic policy targets in the EU. Álvarez also explicitly endorsed Truger’s proposals. Finally, he stressed the importance of investments for Spain in order to advance the digital and economic transformation, to tackle unemployment and to increase welfare state benefits.
MEP Evelyn Regner (S&D) also underlined the importance of reforming the Stability and Growth Pact to enable large-scale investments in respect of sustainability, digitalisation as well as education. According to Regner, the well-being of citizens has to be at the centre of the efforts to reform the Stability and Growth Pact. With this in mind, Regner explicitly endorsed the introduction of a Golden Rule of Public Investment. Lastly, she referred to the successful structuring and implementation of the Recovery and Resilience Facility (RRF) in which the EU Parliament was actively involved. An equally effective involvement by the EU Parliament will also be required for the reformation of the Stability and Growth Pact.
Gilles Mourre (EU Commission, DG ECFIN) pointed out that the Commission had already instigated an evaluation of the Economic Governance Framework in February 2020. Within that context, a consultation had also been initiated, which, however, had been put on hold due to the Covid-19 pandemic. He announced, however, that the consultation would soon be restarted. Apart from that, Mourre emphasised that the spring 2020 evaluation does still form a good basis for the current debate on reforming the Stability and Growth Pact, even though the lessons from the Covid-19 crisis need to be learned. Finally, Mourre was optimistic that an agreement could be reached before 2023, when the general escape clause of the Stability and Growth Pact is to be deactivated.