Fund our future – Why we reject the new fiscal rules

2020 was a determining moment for Europe’s economy. In order to survive the biggest health crisis in decades and ensure collective wellbeing, the European Union put on hold their traditional public debt and deficit rules. We survived the pandemic because we prioritised life and welfare over any other economic imperative. Social wellbeing came first.

And when the war in Ukraine, the energy crisis and the cost-of-living crisis came about, the fiscal rules remained on pause. Once again, we put the welfare of citizens above debt fetishism or deficit reduction. That period also highlighted the urgent need to carry out the green transition and focus on sustainable energies to ensure the resilience of our economies and protect our planet.

During all these crises, European governments were able to take care of people, invest in our future, and rely on our much-needed public services. It reminded us that our economies can survive some of the worst crises with a different approach to the rules of EU economic governance.

EU economic rules must be changed to give the EU the means to invest in its green and social transition, in people and planet.
MEP Philippe Lamberts

The lesson is clear: EU economic rules must be changed to give the EU the means to invest in its green and social transition, in people and planet. Yet, despite an overall consensus among economists, civil society organisations, and trade unions that a reformed EU economic governance must allow the necessary means for investment, the current reform that Members of Parliament are about to vote for replicates the same problems as the previous rules.

The new fiscal rules, a blast from the past?

A few months ago, the European Commission put forward the new economic rules for the future of Europe. In the next few weeks, European lawmakers and governments will decide on a series of laws that can either make or break our economies, our societies, and our planet.

In a nutshell, the new rules simply do not allow the EU to realise the objectives of a green and just transition. These rules prioritise systematic public debt reduction and force governments to cut key public expenditures instead of allowing the massive investments that Europe needs right now.  This will come at the price of fighting climate change, ensuring a healthy planet, and securing the means for our citizens to live a decent life.  It means we would also have to further rely on fossil fuels because we wouldn’t be able to transition to greener energies. And families would not be able to access well-insulated and affordable homes. Hospitals would stay underfunded and scientific research stalled.      

With the new fiscal rules on the table, Europe’s economy will get stuck in the past and be more vulnerable to new economic crises than before. And citizens will pay the price again as any investments in the green transition, necessarily insufficient in size, could only be made possible by cutting expenses elsewhere, e.g. to social spending, education, health, culture, or housing. Our aim is to realise both the green transition and the reduction of social inequalities: we refuse to be forced to choose between them.

Who is in favour of the new fiscal rules?

The proposed new fiscal rules are not sustainable, yet some countries and political parties still believe that this recipe for disaster is the way forward. The conservatives and the socialists in the European Parliament seem to have forgotten the 2008 economic crisis and the pain that it caused as they are now about to vote for a model that will bring us back to austerity. Sadly, the self-styled “frugal” countries are also trying to impose an ideological programme based on the idea that if governments cut back on spending, they can reduce debts and then cut taxes. In practice, this means cutting investment in the future, because the future has no lobby.

Cutting investments and cutting social spending would not just damage the future, it can damage the present too. The European Trade Union Confederation (ETUC) recently published a report that showed the massive impact that these cuts would have in what they call ‘austerity watch’. Trade unions warn us of how many teachers or nurses we could lose with these new fiscal rules. It would be like thanking nurses and doctors for their work during the pandemic by slashing their jobs. And then, imagine facing another health crisis with half of the healthcare workers.

Conservatives and socialists want to make our economies more “stable” by cutting down on the very pillars that hold our societies together. They are wrong. The age of austerity and restrictive economic policies belong to the past. There will be no sustainable debt in an unsustainable world.   

How can we finance a green and social Europe?

Some might wonder how we plan on financing the future of our economies. A while ago we anticipated the upcoming new rules and put forward a series of proposals. Briefly, what we ask for is to look at debt in different ways, as one size cannot fit all. Debt coming from investing in fossil fuel subsidies cannot be at the same level as debt coming from investments in green energies. The situation of one country’s economy cannot be evaluated in the same way as that of a different country with completely different structures. Also, we should be able to spread out the debt coming from an investment in the number of years that the investment will last. Similarly, to getting a mortgage, people can pay the loan out in monthly payments, they are not expected to pay it all off in one go.

We should look at these investments through a positive lens, through what they will bring to society rather than how they will make our debt percentages look.
MEP Philippe Lamberts

We should look at these investments through a positive lens, through what they will bring to society rather than how they will make our debt percentages look. What matters is what we do with it. Higher debt in the short run to insulate homes, reduce energy bills and create new jobs is an investment that comes with a triple dividend, for climate, for households, and for workers. This is how we prepare for the challenges ahead, build a more resilient, prosperous, and stable economy, one that can actually thrive. And one that will actually give us the means to reduce our debt in the long run. This is what responsibility is about. It is about addressing the real deficits in society.

Responsibility means saying ‘no’ to austerity

The time has come to be responsible. As Greens/EFA we will vote against the new fiscal rules to say no to austerity. We call on our colleagues of other political groups to join us in rejecting these rules. We call on European governments to rethink this new reform and not rush into an economic system that would leave us in the era of fossil fuels, climate disasters and unsustainable living conditions. The Greens will also be alongside the trade unions on the 12th of December in the streets of Brussels to fight against a return to austerity rules. The past is there to learn from it, not to recreate it. We will not let our future be hostage to economic irresponsibility.