Fiscal rules review must shift Europe towards new growth model

05/02/2020

Economy Commissioner Paolo Gentiloni at a PES Commissioners-designate meeting, September 2019

Economy Commissioner Paolo Gentiloni at a PES Commissioners-designate meeting, September 2019

The PES strongly welcomes the Economic Governance Framework Review announced today by Economy Commissioner Paolo Gentiloni. This will be a re-examination of the EU’s basic economic and fiscal rules, which impact member states’ budgets.

The review must focus on investments for a new growth model for Europe, based around a new growth strategy anchored in the European Green Deal. Investment in sustainability will promote a modern economy, social progress and strong economic growth.

PES President Sergei Stanishev said:

“For too long economic governance has focused on austerity. Now it must focus on a new growth model.

“Our family has been fighting since the beginning against the cuts-only mentality that is unsustainable as well as unfair. We need to make sure investment is possible as an economic driver, and fiscal rules must allow for that. The EU must pursue prosperity and wellbeing for all, through investments which promote stability and sustainable growth.

“We will be following the review process closely and we will apply political pressure to make sure that European fiscal rules serve the needs of society and promote cohesion, equality, wellbeing and sustainability.”

The Economic Governance Framework Review is an opportunity to move Europe towards a sustainable and inclusive future, based around the European Green Deal. To make this ambition a reality, significant investment is required.

Europe’s fiscal policy during the aftermath of the 2008 economic crisis was clearly not fit for purpose and it is right that the rules are being examined. The review is a positive sign that the EU is moving towards fiscal policies that better promote growth, innovation, investment and employment.

The PES European elections manifesto – A New Social Contract for Europe - called for European fiscal rules to be reviewed to make sure that they foster sustainable economic growth, and contribute to the implementation of the UN Sustainable Development Goals and the Pillar of Social Rights.

European fiscal policy must be a tool which the EU and member states can use to boost employment, address inequalities, and promote convergence within societies and between countries.

Member states must be allowed to adapt their policies and reforms in a timely manner, according to their society’s needs. The PES has long argued for an increase in public investment levels to promote environmental sustainability, economic growth and social wellbeing, with the implementation of a ‘golden rule’ which excludes these investments from national deficit calculations.