The proposal to reform the European economic governance framework that the European Commission presented at the beginning of November (see EUROPE 13060/1) is certainly “a good basis” for negotiation between the Member States of the European Union, but it “could nonetheless lead to significant fiscal consolidation requirements for highly indebted countries”, according to the Jacques Delors Institute in a note dated Friday 18 November.
The researchers believe that the Commission should rapidly present a numerical model that distinguishes between several scenarios of public expenditure control in relation to public debt reduction paths that a Member State should expect in terms of its fiscal performance.
The think tank endorses the EU institution’s approach of giving more latitude to EU countries in defining their macroeconomic policy through fiscal plans of at least four years, on the one hand, and strengthening control and enforcement at EU level in case of non-compliance with agreed commitments, on the other.
Nevertheless, this method should leave enough room for a new government to modify a multi-annual plan negotiated by its predecessor, the institute believes.
Finally, the Jacques Delors Institute is concerned that the revision of the Stability and Growth Pact, as described by the Commission, will not sufficiently stimulate investment in climate and digital transitions or in the EU’s strategic autonomy. According to it, public debt sustainability analyses, which would be used to determine the fiscal consolidation path of indebted countries, do not take into account the negative consequences of climate disruption. After 2026 and the end of the Next Generation EU Recovery Plan, a new dedicated European public instrument, which would distribute subsidies in exchange for reforms and investments, would therefore be “preferable”, it adds.
See the note from the Jacques Delors Institute: https://aeur.eu/f/45h (Original version in French by Mathieu Bion)