Following its suspension in 2020 due to measures of fighting the pandemic, the EU Commission relaunched the Economic Governance Review a year ago. Due to the crisis, the deficit rules were also suspended at the same time. But even before the crisis, there had been intensive discussions relating to the restrictive economic requirements and the concern that the reform of Economic Governance would once again focus on economic stability targets, above all the restriction of national debt and budget deficits in individual Member States. In view of the tense economic situation against the background of the Ukraine War and the pandemic-related interruptions to supply chains still having a lasting effect, the demand for a change in the structure of the current economic system is more relevant than ever. According to the signatories, this realignment must focus on the well-being of all people and the planet.

Important demands for a fairer economic system

The basic letter contains several basic demands, the implementation of which shall ensure a just and sustainable reform of EU fiscal rules.

For example, it is pivotal for the new fiscal rules to be allowed a certain fiscal flexibility. Only then, the target of full employment with sustainable and well-paid jobs can be reached. Also needed is financial scope for green public investments to close the “green funding gap” in Europe, whereby special focus has to be on spending to reach the environmental targets of the Paris Climate Agreement or other multilateral agreements.

Apart from green investments, necessary investments in the social sector should also not be neglected. In this context, it must in particular be ensured that all people have access to high-quality public services. A social safety net for the most vulnerable groups needs sufficient funding.

All of this is based on the demand to give priority to permanent well-being as target of a realignment of European economic policy. In view of the wide range of challenges, solely orienting on economic variables such as economic growth is no longer sufficient. Hence, a change of thinking has to take place. According to the signing organisations and academics, the new regulations should comprise indicators for social, economic and environmental results. This would make it possible to provide a more comprehensive and better overview of the EU’s basic targets and thereby to contribute to the long-term well-being of the European population.

Reform of the Stability and Growth Pact

Apart from content-related reforms, there is also a need to improve the processes at European level. In this context, the letter especially refers to decision-making within the scope of the Stability and Growth Pact (SGP). Due to the significance for fiscal scope and thereby investment opportunities for Member States, the SGP has to be democratic and transparent. Here, in particular the European Parliament must be allowed to play a greater role.

Further information:

Open letter to EU Heads of State and Government

AK EUROPA Position Paper: Economic Governance Review

AK EUROPA: Crucial phase for the social realignment of the European economic policy