Draghi and Macron: The EU’s fiscal rules must be reformed - "an enhanced fiscal framework"

The recovery is well on its way. The EU economy has not yet returned to its pre-pandemic path, but... We must deepen the reform agenda and accompany these transformations with large-scale investment in research, infrastructure, digitisation and defence.

Prior to the pandemic, the EU’s existing fiscal rules were already in need of reform. 

There is no doubt that we must bring down our levels of indebtedness. But we cannot expect to do this through higher taxes or unsustainable cuts in social spending, nor can we choke off growth through unviable fiscal adjustment.

We need to have more room for manoeuvre and enough key spending for the future and to ensure our sovereignty. 

Debt raised to finance such investments, which undeniably benefit the welfare of future generations and long-term growth, should be favoured by the fiscal rules, given that public spending of this sort actually contributes to debt sustainability over the long run.

Mario Draghi and Emmanuel Macron FT 23 December 2021

https://www.ft.com/content/ecbdd1ad-fcb0-4908-a29a-5a3e14185966

The quarter-century-old Stability and Growth Pact is contained in a treaty, so any amendments would have to be ratified by 27 legislatures.

In 2021 the European Commission activated an “escape clause” in the agreement, freeing countries to spend extraordinary sums to salve the human and economic pain of Covid. Nations must now agree on what will happen when the suspension ends in 2023.

https://englundmacro.blogspot.com/2021/12/rethink-of-stability-and-growth-pact.html

It was also clear that the stability and growth pact was – as I have said before – “stupid”, not because it was mistaken in its objectives, but because it was founded on purely mathematical parameters without any discretionary powers or political instruments to enforce it.

Romano Prodi former Italian prime minister  president of the European Commission, 1999-2004 

FT May 20 2010

https://englundmacro.blogspot.com/2021/05/stupiditetspaktens-dod.html

"I am sure the euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created."

Romano Prodi, EU Commission President. Financial Times, 4 December 2001

https://englundmacro.blogspot.com/2011/12/prodi-it-is-politically-impossible-to.html