The new European economic governance framework fails to tackle the challenges of a just ecological transition

More than thirty civil society organisations have sent a letter to the spanish Prime Minister, Pedro Sánchez, requesting several measures to ensure that the reform of the European fiscal framework, promoted by the European Commission, responds to the challenges of a just ecological transition.

  • The reform of the economic governance framework promoted by the European Commission will be debated on 14 March by the finance ministers of the Member States. 
  • The organisations have warned of the lack of democracy in the Commission’s proposal and the incoherence of the measures with regards to their climate commitments.

On 9 November 2022, the European Commission presented a Communication on orientations for a reform of the EU economic governance framework. This document brings together the guidelines for adjusting fiscal rules and, once agreed by governments, will be mandatory in all EU countries from 2024.

Since 2020, because of the COVID-19 pandemic, and later in 2021 because of the war in Ukraine, these rules have been frozen, but are expected to be reactivated at the end of this year.

Although the European Commission’s proposal has some positive aspects – such as the adaptation of the rules depending on the country or the possibility for each member state to elaborate and negotiate its plans – the organisations regret that it is still framed within the paradigm of unlimited economic growth. They also point out that it is based on indiscriminate public spending that is inconsistent with climate or social objectives and on arbitrary macroeconomic objectives, such as keeping Member States’ public debt below 60% of their GDP and public deficits below 3%.

In the words of Nicola Scherer, financial justice researcher at the Observatori del Deute en la Globalització:

“The economic governance framework led to cutbacks in healthcare and education policies. The Constitution was even changed by reforming article 135 to prioritise debt repayment. We have to learn from the mistakes of 2008 and have a long-term vision. The current reform proposal does not define a framework for greater fiscal capacity and fairness to tackle inequality and the ecological crisis”.

The signatories believe that the starting point needs to be considerably improved and the letter puts forward a number of proposals:

Strengthen democratic mechanisms and transparency. The European Parliament and national parliaments need to be included in the debates, not just governments. Robust mechanisms for auditing, control and scrutiny of public spending are also needed.

Implement fair and green taxation measures. Increased fiscal capacity should include corporate tax reform or higher taxation of capital income to break with its favourable treatment compared to labour income. Expand green taxation, including compensation for lower incomes, and effectively combat tax avoidance and evasion by the rich. Debt – and its implications for future generations – must not be the alternative solution to tax shortfalls and evasion.

Greater coherence in public spending. Plans and investments must pursue compliance with the Paris Agreement, the Montreal biodiversity targets and the rights enshrined in the European Social Charter with the development of greener and purpler social budgets and including environmental, climate, social and feminist indicators. The fiscal space generated cannot be squandered for more military spending and the expansion of fossil and nuclear infrastructure.

Overcome the model of unlimited economic growth. Europe has an ecological and inequality debt that needs to be faced with urgency. We cannot continue to line the pockets of a minority at the expense of the planet and future generations. It is necessary to open the debate and involve all citizens, to pursue a fairer and more resilient economy, at the service of people and within the limits of the planet.




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