Fiscal for the Future: Calling for a Sustainability and Wellbeing Pact

After three decades in place, our current fiscal framework is no longer capable of meeting the challenges of climate protection and creating a healthier and more equitable society. Furthermore, the terrible war in Ukraine highlights the need for the EU to accelerate the energy transition toward renewable energy, which would benefit both people and the environment. 

On March 15, finance ministers from across Europe will meet with relevant EU Commissioners at an Economic and Financial Affairs Council (ECOFIN) meeting to discuss national budget guidelines for 2023 and the outcome of the economic governance review, providing a critical opportunity to rethink Europe’s entire budgetary framework. This should serve as a catalyst for rethinking Europe’s economic governance and, inevitably, shifting the focus to people and the planet instead of purely economic growth.

Growth for the sake of growth has not and cannot sustain the well-being of our society or environment. Based on the current challenges the EU is facing, more austerity would be the wrong course of action. 

We simply cannot afford to delay the establishment of a fiscal framework that puts people and the planet in focus. For this, the EEB has joined forces with civil society organisations, think tanks, and trade unions from across the European Union to call for fundamental reform of the EU’s fiscal rules.

What are the current rules?

The current economic framework of the EU was established by the Maastricht Treaty in 1992. Legislative changes following the global financial crisis created strict fiscal rules that limit public debt and the deficit of Member States. 

Most notably, the two main rules dictate that the debt of a country must stay below 60%, and the deficit must remain below 3% of the GDP. 

30 years of numerous seismic global events later, these rules are no longer fit for purpose. They are unconcerned about spending quality and do not take into account how an investment may be required to meet certain environmental objectives, potentially impeding rapid and effective climate action.

To fight climate change and respond to the new challenges that await us, we need to respond to this crisis with a focus on rebuilding our system towards a wellbeing economy

In order to do so, we need rules that support green and care jobs, lift up vulnerable communities and improve the well-being of people and nature. 

What we demand for the future!

The time is now to reform the EU fiscal framework towards a well-being economy, in the service of humanity and nature.

Climate change has become an even more urgent threat to our existence. Recent global temperatures are the hottest we have experienced in the past 2,000-plus years. With one-third of the EU’s population living within 50 kilometres of the coast, flooding and erosion caused by sea-level rise will be felt most acutely by them.

The current rules fall short of ensuring we can adapt to this crisis and the ones that follow. Therefore, we are calling for:

  1. No return to austerity

We call for a transformation of our economies from a growth economy towards a well-being economy. Europe cannot return to pre-pandemic fiscal rules. More austerity would be counterproductive and will jeopardise our recovery from the COVID-19 pandemic, as well as our transition and response to the climate crisis.

Rather than focusing on arbitrary debt and deficit ratios, it’s time to support health and well-being via democratically-defined objectives. We must invest in strengthening supply chains to make the economy more resilient. 

  1. Spending decisions that prioritise climate action

The idea that economic growth can continue infinitely without destroying the environment is a myth. We are getting closer to exceeding the safe operating space for humanity on this planet while not meeting social aims such as affordable access to energy for up to 25% of Europeans. 

We call for a reform of the economic governance framework to ensure spending quality over quantity. Citizens’ money should be allocated towards objectives that are consistent with climate and social goals, promoting well-being for all. 

  1. A new approach to debt sustainability

We are calling for a new approach to debt sustainability for all member states, to avoid self-defeating austerity and fiscal risks. 

Reforms should replace EU-wide debt targets with country-specific targets and debt reduction pathways that take specific circumstances into account and force member states to invest in a just transition.  

  1. An intersectional approach to policymaking

The European Commission stated in their annual Report on Gender Equality in the EU that the COVID-19 pandemic ‘rolled back’ the progress of gender equality.

We must pay attention to how economic policies impact women and marginalised groups. Our economic framework should address environmental challenges while also guaranteeing social and gender justice. 

We need to act now for a green, just, and democratic European economy

This meeting, which comes ahead of the release of the Commission’s proposal on fiscal rules reform that is expected to be announced in June, should be an important first step in laying the groundwork for reforming the EU fiscal framework, to bring it in line with fundamental EU values of respect for human dignity and rights, democracy, and equality.

The meeting also takes place at the same time as the publication of the Manifesto for a Green, Just, and Democratic European Economy. The manifesto, which has been signed by over 270 prominent academics, think tanks, and civil society organizations from all EU 27 Member States, including EEB, calls for economic policies that serve the reduction of socioeconomic, intergenerational, and gender inequalities, the realization of social rights, and the protection of climate and environment.

The constant push for economic growth is a product from the past, unfit to create a new future.  It’s time to create a new-and-better-normal and build an economic system that puts the well-being of people and nature at its core.