Today, a vote in the European Parliament cleared the path for the final stage of negotiations on reforming the EU fiscal rules. Finance Watch, the non-profit association dedicated to reforming finance in the interest of citizens, argues that the shortcomings in the text agreed today by the European Parliament Committee on Economic and Monetary Affairs (ECON) will harm EU citizens and the economy.
Commenting on the news, Benoît Lallemand, Finance Watch Secretary General, said:
The EU fiscal rules will directly affect the lives of EU citizens – from the cost of living to employment, health and education. Four years on from the COVID-19 pandemic, we’re facing challenges on multiple fronts, and addressing them means public budgets and investments must play a bigger role.
More public spending is needed to accelerate a transition to renewable energy sources that leaves no one behind and increases the strategic autonomy of the EU economy.
It’s also fundamental in preserving financial stability. Economists across the political spectrum agree that the fiscal rules now on the table still fall back on outdated ideologies and a macrofinancial regime that no longer exists.
How Members of the European Parliament vote on this issue in the April plenary session, and what politicians then campaign for in the run-up to the EU elections, will show on which side of history they stand.
Finance Watch, the non-profit association dedicated to reforming finance in the interest of citizens, has been following the fiscal rules closely for the past three years, publishing several key reports on this topic, including Fiscal Mythology Unmasked and The Debts We Need, and working as part of the Fiscal Matters coalition to push for the fundamental reform of the EU fiscal rules.
According to the Fiscal Matters coalition, the text adopted today in ECON adds several positive elements, including common EU priorities brought from the annex to the body of the text, carving out a small exemption for investments linked to EU funds, the inclusion of the social convergence framework, an obligation to report investment gaps, stakeholder participation requirements, a demand to improve the debt sustainability analysis (DSA), and strengthening the role of national fiscal institutions.
However, the text introduces arbitrary and complex safeguards forcing EU countries to reduce their debts and deficits at an unnecessarily fast pace, while also not paying sufficient attention to the quality of public spending. These shortcomings stand to undermine the overall effectiveness of the new rules if not reconsidered during trilogue negotiations.
Fiscal rules timeline:
- 26 April 2023: European Commission proposes reform of European economic governance framework
- 20 December 2023: The Spanish presidency reaches an agreement on new EU fiscal rules
- 17 January 2024: European Parliament agrees position on EU fiscal rules
- April 2024: European Parliament plenary vote on the EU fiscal rules
About Finance Watch
Finance Watch is an independently funded public interest association dedicated to making finance work for the good of society. Its mission is to strengthen the voice of society in the reform of financial regulation by conducting advocacy and presenting public interest arguments to lawmakers and the public. Finance Watch’s members include consumer groups, housing associations, trade unions, NGOs, financial experts, academics and other civil society groups that collectively represent a large number of European citizens. Finance Watch’s founding principles state that finance is essential for society in bringing capital to productive use in a transparent and sustainable manner, but that the legitimate pursuit of private interests by the financial industry should not be conducted to the detriment of society.
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