Finance Watch deconstructs what it calls the “myths” surrounding European fiscal rules and makes proposals to reform the Stability and Growth Pact in a report published on Monday 12 July.
Instead of focusing on an arbitrarily chosen ratio of public debt to GDP, the EU legislator should direct its attention more towards the medium-term sustainability of debt by analysing criteria such as the level of income of a Member State, the evolution of interest rates and the composition of a public debt (currency in which securities are issued, the mapping of sovereign holders and the maturity of the debt issued).
For Finance Watch, public debt is not necessarily a burden to be borne by future generations. By investing for the long term, governments aim to meet the basic needs of their population and to amortise the costs over several generations. And the very low level of interest rates currently makes it possible to invest at very low cost.
Furthermore, the organisation believes that the current Pact is too rigid in advocating the pursuit of budgetary surpluses which can be counterproductive in times of economic recession. It recommends promoting the quality of public spending by prioritising long-term environmental and social sustainability.
See the report: https://bit.ly/2T5RchL (Original version in French by Mathieu Bion)