The activation at the end of March of the Stability and Growth Pact's general escape clause to open the budgetary floodgates and fight the Covid-19 pandemic was necessary, but this clause should provide for a review date, for example "in spring 2021" said the European Fiscal Board in its assessment of the appropriate fiscal position for the euro area in 2021, which it published on Wednesday 1 July.
In the course of 2021, the economic recovery should be robust enough to at least start discussing the reintroduction of European fiscal rules, said committee chairman Niels Thygesen.
The European Committee also gives its opinion on the proposal for a European Recovery Plan that the European Commission has tabled to help relaunch the economies of the Member States.
This "significant" initiative would, in the committee's view, overcome two pitfalls inherent in the existing economic governance framework. Firstly, the provision of grants rather than loans would "ease fiscal constraints at national level", while leaving wider scope for EU influence on how the funds are spent.
Secondly, the proposal emphasises "structural, rather than cyclical, spending" in areas where investment would bring added value for the whole EU, such as climate and digital transition.
Nevertheless, the best way to achieve a strengthening of fiscal policy at the European level would be to create "a central fiscal capacity", according to the European advisory body.
For 2021, the European Fiscal Board recommends continued public fiscal support to get the economy back on track and converge towards the pre-crisis estimate of potential growth. In their opinion, the draft national budget plans of the EU19 for next year provide an opportunity to direct this support towards growth-enhancing public spending and to differentiate it according to each individual situation.
See the report of the European Fiscal Board: https://bit.ly/2ZnVlN2 (Original version in French by Mathieu Bion)