Dublin MEP Ciarán Cuffe has warned that new EU fiscal rules, if approved, would be detrimental to the bloc’s future competitiveness and ability to meet its climate goals. The revision to the economic governance framework, also known as the fiscal rules, introduces changes that focus excessively on debt reduction over achieving key EU priorities, like the European Green Deal. MEPs will vote tomorrow (Tuesday) on the proposed changes. 

Ciarán Cuffe MEP said:

“EU leaders have failed to learn the lessons from the financial crisis. The proposed changes to the EU’s fiscal rules blindly prioritise reducing debt over achieving key EU policy priorities, like the European Green Deal. Europe needs investment, not austerity, to meet our shared goals. Failing to properly finance the green transition will lead to Europe falling even further behind the US and China, and it will make our societies poorer. 

“These investments are not only necessary, but also advantageous: they will create local jobs, future-proof the European economy, improve our competitiveness on the world stage and help us to finally achieve energy sovereignty. Delay them, and more money will be required to achieve the same results later. 

“The only responsible option here is returning to the negotiating table. We need fiscal rules that protect public investment and that give Europe the flexibility to respond to current and future challenges. Putting national budgets in a straitjacket is not the solution.” 

MEPs will vote tomorrow (Tuesday) on the reform of the EU’s economic governance framework. The revision of these rules was first proposed to improve debt sustainability, however the negotiations were hijacked by fiscal conservatives and the resulting rules are overly focused on debt reduction and will lead to a return of austerity.  

New debt and deficit benchmarks are set, and a mandate for annual debt and deficit reductions that will require unnecessary budget cuts are introduced. These targets are prioritised to the detriment of much-needed investments in tackling social and climate challenges. Most Member States will have to implement significant budget cuts as a result. A recent report found that only three EU countries, including Ireland, will be able to meet their green and social investment needs under these new  rules. 

These changes are introduced at a time when significant investments are required to fund Europe’s green transition, with 32 policies adopted over the last five years to reduce CO2 emissions by 55% by 2030 and achieve Net Zero by 2050. A recent report found that the EU needs to invest €360 billion extra per year (2.3% of EU GDP) to reach Net Zero by 2050 and public spending must double from €250 to €510 billion per year to accelerate  private investment and fund non-profitable decarbonisation solutions. This is less money than the EU spend on COVID-19 recovery or fossil fuel subsidies.