Rethink the recovery - joint reaction to Commission's fiscal policy approach
Yesterday, the European Commission presented a communication on an updated approach to fiscal policy response to coronavirus pandemic.
The coalition behind the RethinkTheRecovery campaign welcomes this communication but raises a few important concerns. We agree that to be consistent with the European Green Deal and a socially just transition, to build up a resilient economy that works for people, and to decarbonize it within the timespan of only one generation, massive and well-designed investments are needed over the long run.
The communication states clearly that important financing needs will be required for financing the recovery on more social and environmental friendly bases. It does not, however, provide a clear indication how it envisages the role of public finance in this respect, including the badly needed reform of the European fiscal rules.
Although it is stated that “preliminary indications would suggest to continue applying the general escape clause in 2022 and to de-activate it as of 2023”, it is also written that a formal decision will be taken only in May 2021. Even more problematic is the intention of the Commission to relaunch the public debate on the economic governance framework only once the recovery takes hold, and not before. Its centerpiece, the Stability and Growth Pact and subsequent legislations, has been criticised for its austerian bias and the procyclicality embedded in its methodology, preventing a proper recovery and sustainable employment creation. It is inconsistent with the European Green Deal and a socially just transition.
We cannot afford to repeat the mistakes of the past which would drive us into much deeper social, environmental and economic crises.