The Economic and Social Council (CES) considers that the new European fiscal rules approved at the beginning of the year form a budgetary framework that “does not fully resolve the main problems suffered by the previous system”, since it maintains “the complexity, the procyclicality and lack of protection” of investment. To remedy this, a report prepared by the Government’s advisory body on socioeconomic and labor matters, released this Wednesday, includes different recommendations, among which it considers the achievement of the Banking Union to be a priority; the deepening of financial integration associated with the formation of the Capital Market Union; the definition of an industrial policy that advocates for specific branches of activity; as well as the issuance of joint public debt (eurobonds) that allows strengthening the EU’s own resources system. That is, launch a new million-dollar recovery fund so that Europe can undertake the necessary technological and green investments.
According to the design of the new fiscal rules—which clamp down on the annual public deficit by preventing it from continuously exceeding 3% of GDP, and indicate that the volume of public debt must be at 60% or less—“ “It seems that the EU is preparing to return to fiscal chastity,” reflected Antón Costas, president of the CES, who judged the preparation of the report to be “very timely” at this time, since elections will be held from June 6 to 9. to the European Parliament. In his opinion, in accordance with the current sociopolitical panorama, “Europe is forced to decide what type of behavior it is going to develop under these fiscal rules: whether it wants to be a stepmother, with a rigid or merciless attitude like the one it used in the crisis of 2008; or fairy godmother, as happened during the pandemic, when they even suspended them,” Costas added.
“This will depend on whether the EU can maintain (and recover) certain public goods, as SURE was. [un programa de 100.000 millones de euros que permitía a la Comisión Europea recaudar fondos en los mercados para prestarlos a los Estados miembros a tipos de interés favorables y que estuvo en vigor hasta finales de 2022]; and the Next Generation funds,” the president of the organization stressed.
Although the CES’s assessment of the design of the new fiscal rules is positive, since the Madrid-based organization considers that this new governance “focuses on the medium term, favors the involvement of the States and allows for better reconciliation of the sustainability of the fiscal and growth by giving more fiscal space to the most indebted countries”; observes, however, that this “remains a complex system of rules” and that it uses “not directly observable” variables and “indeterminate concepts.”
“Some forecasts are unrealistic,” indicated Antonio Romero, president of the CES Labor Commission, who has prepared a report in which 60 councilors from both the most important business and union organizations in the country, as well as from the agricultural organizations, those of fishing, those of the social economy and consumers. “To solve this problem, it is necessary to reform the common European mechanisms with budgetary capacity, reinforce these investment mechanisms at the European level and complement national fiscal policies, which allow us to face the macroeconomic particularities of the moment,” Romero agreed.
To achieve the balance of the new framework with monetary policy, the CES report considers it necessary to pay attention “to the impact on economic recovery of the coexistence of a stricter fiscal stance with the delayed effects of monetary restriction.” And also to the “ability to reconcile the objectives of monetary policy and debt sustainability” or to the “collision that could arise between the definition of the debt sustainability criterion according to the new framework and according to the Transmission Protection Instrument of the European Central Bank (ECB) which also defines and evaluates this criterion.” For all these reasons, the Council identifies completing the Banking Union as a priority, since this “would make it possible to avoid situations of financial instability”, while contributing to the “economic resilience and sustainability of the Union”.
Greater competitiveness
Along the same lines, another of the main recommendations included in the document is supported – which will be presented in a Joint Commission in the Congress and the Senate, as Costas has confirmed -, which is to deepen financial integration “advancing the Union of the Capital Market”. With it, “more diversified, deep and competitive financial and capital markets” would be configured, which would allow “private capital to be mobilized and have the necessary financial resources to promote innovation and support investments within the framework of the Next Generation program”, indicates the text. The way to obtain these resources would be, “in addition to the issuance of joint public debt”, as Costas has pointed out, through the creation “of new European taxes, the revenue from which will be distributed among the Member States”.
Another of the most important recommendations in the report is the one that suggests the definition of a common industrial policy that should advance “in a supranational aid model” that allows the EU to “compete with other blocks at the international level” and that “ensures for cohesion and link economic activity to the territory.” This implementation of new common rules of the game should be extended, in the opinion of the ESC, “to the trade strategy of the European Union.” And he urges this to be the case, since he warns that the trade frictions that are currently occurring “seem to have been exacerbated by the need to accelerate the decarbonization of the European economy, to fight climate change and to protect biodiversity.” ”.
To conclude, Costas has advocated for “taking European human capital into consideration, valuing investments in their entirety, taking into account all their effects,” and “for incorporating the childhood and gender perspective into this dimension, since it is more “It has proven that investment in the fight against child poverty has a great return in economic and social terms.”