Economic governance must put public finances on sustainable footing

Following the European Commission’s relaunch of the EU’s Economic Governance framework today, BusinessEurope’s Director General Markus J. Beyrer said: “We support the European Commission’s decision to restart the Economic Governance Review. Whilst the immediate concern is for policymakers to avoid premature unwinding of support for the recovery, in the medium term, EU Member States must return to fiscally sustainable positions.

We need a proper enforcement of the Stability and Growth Pact, and we need simplified rules, reduced pro-cyclicality and we also need to reflect the post-pandemic context. This will help EU Member States to put their public finances on a sustainable footing and strengthen investment confidence.

The current low interest rate environment provides some flexibility regarding the pace at which debt levels need to be reduced. But the current low interest rate must be employed wisely by focusing on productive investment and reforms that create fiscal space for future crises.

More attention needs to be directed at the quality of investments, with a greater focus on the proportion of Member States’ expenditure towards growth-enhancing expenditures.”

Our full position paper on the EU economic governance review released in May 2021 outlines that the review should seek to simplify the fiscal rules and reduce their pro-cyclicality. This way they can play a full role in helping Member States put their finances on a sustainable footing.