Fiscal Policy for a Thriving Europe

Making the EU fiscal framework fit for the green and just transition

The current EU fiscal framework is not fit for purpose to cope with today’s challenges: unprecedented levels of investments are needed to achieve environmental, societal, and economic goals and for a sustainable recovery after the COVID pandemic. Public funding plays an important role to navigate through this transition and build resilient societies. However, the fiscal flexibility of Member States is constrained by the EU governance framework, which requires EU governments to adhere to strict fiscal rules. With the suspension of the Stability and Growth Pact (SGP) due to the pandemic last spring, an opportunity has arisen to rethink and reform the fiscal rules.

In this project, we explore the question of how fiscal policy needs to be designed in a period marked by the impact of a pandemic, the climate crisis and geopolitical challenges, so that governments can both meet their welfare obligations and make important investments while keeping their levels of public debt sustainable. In a first step, we have categorised the different proposals for a reform of the EU fiscal framework and have analysed them in terms of their feasibility and the impact they would generate. To contribute to the debate on the Member State level, we estimate the effects that different reform proposals would have on the budgetary positions of selected Member States. In a parallel workstream, we have conducted a technical analysis of specific parts of the EU fiscal framework and have analysed different options for their improvement. All our activities share the goal of supporting finding a consensus for a reform of the EU fiscal framework. To leverage the impact of our work, we engage in a coalition of civil society organisations, think tanks and trade union leaders that work towards the same goal.