On 19 October 2021, the EU Commission relaunched the economic governance review which had been suspended due to the Covid-19 outbreak. From the Austrian Chamber of Labour’s point of view, a reform is urgently required to enable the sustainable development of wealth and wellbeing in all Member States.
The EU Commission had launched an economic governance review as early as February 2020; however, in view of the Covid-19 pandemic it had been temporarily suspended. As Commission President Ursula von der Leyen announced in her State of the Union Address, the EU Commission is now relaunching the public debate on reforming the Stability and Growth Pact. On 19 October 2021, Executive Vice President Valdis Dombrovskis and Commissioner for Economy Paolo Gentiloni presented first reflections on possible reforms in a press conference. Parallel to this, the EU Commission launches another public consultation. It remains to be seen whether the results of the first consultation, in which AK had participated with a Position Paper in June 2020, will be taken into account. Building on the results of this year’s consultation, first fiscal guidelines shall be published in the first quarter of 2022. The EU Commission expects to reach consensus with Member States by 2023 and seeks to substantiate this consensus in form of a legislative proposal or a Communication.
Even though the EU Commission touches on the overarching goal of an economically, socially and environmentally balanced sustainable development, the Communication once again focusses on economic stability targets, with public finances leading the way. It remains the EU Commission’s key concern to prevent high government debt and deficits while enabling more investments for the economy’s green and digital transformation. However, as pointed out by Dombrovskis, an analogous reform of the fiscal rules amounts to nothing more than an attempt to square the circle. Hereby, Dombrovskis suggested a Golden Rule for public investments as a possible reform option. The review of the Stability and Growth Pact shall include a simplification of the underlying fiscal rules and ensure their transparent implementation.
From AK’s point of view, relaunching the debate on reforming the EU’s economic governance as well as the related consultation is to be welcomed. However, a fundamental reform is required to guarantee a sustainable and wealth-oriented economic policy beyond austerity. Thereby, the implementation of a Golden Rule for public investments is in line with a longstanding demand of AK to enable the financing of investments through loans. Apart from that, the scope for counter cyclical fiscal policy has to be increased in order to be well-equipped to deal with future economic crises. It is furthermore essential for EU fiscal rules to be sufficiently flexible to be able to balance conflicts with other social goals, such as full employment and climate protection. Lastly, the entire economic governance framework needs to be democratised. The framework’s transparency relating to underlying decision-making processes needs to be improved, for example by involving the EU Parliament, and the social dialogue has to be strengthened by involving social partners and civil society groups.
For the Austrian Chamber of Labour it is clear: when reforming the economic governance, it is vital to put citizens’ wellbeing at its heart. We have to learn from the mistakes of the austerity policies following the 2008 economic crisis and use fiscal policy as an effective means for the socio-ecological transformation. Thus, the Austrian Chamber of Labour will participate in the consultation process, the target being to make the EU more social and sustainable.