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EU
budget rules safeguard the value of the euro by setting limits
on government deficits and debt. Since they were set up, they
have grown increasingly complex and the EU is now thinking how
to change them to better fit new economic realities.
The main challenges are how to cut government debt that has
surged during the COVID-19 pandemic without stifling growth, and
how to provide incentives for massive investment needed to fight
climate change and to make supply lines more secure after global
lockdowns exposed their fragility.
"There is no doubt that we must bring down our levels of
indebtedness," Italian Prime Minister Mario Draghi and French
President Emmanuel Macron said in a joint article in the
Financial Times.
"But we cannot expect to do this through higher taxes or
unsustainable cuts in social spending, nor can we choke off
growth through unviable fiscal adjustment," they said.
The two leaders wrote that their strategy was instead to curb
recurrent public spending through "sensible" structural reforms
and that EU fiscal rules should not prevent them from making
necessary investments.
EU fiscal rules do not give any special treatment to investment
now, and France and Spain proposed in September to exempt
"green" investment, and possibly also money spent on
digitalising the economy, from EU deficit calculations.
Some northern EU countries disagree, worried it will be hard to
define what constitutes an investment to fight climate change.
France has also said the EU should better secure its economic
sovereignty by moving production of some key items to Europe, as
COVID-19 lockdowns showed disruptions in supplies from China -
where much of Europe's pharmaceuticals and chips come from - can
be devastating.
"We need to have more room for manoeuvre and enough key spending
for the future and to ensure our sovereignty," Macron and Draghi
wrote in the op-ed.
"Debt raised to finance such investments, which undeniably
benefit the welfare of future generations and long-term growth,
should be favoured by the fiscal rules, given that public
spending of this sort actually contributes to debt
sustainability over the long run," they wrote.
(Reporting by Tassilo HummelWriting by Mathieu RosemainEditing
by Mark Potter)
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