To face the serious consequences of the COVID-19 on public health and on the deterioration of the European economy, the European Commission set off the General Escape Clause concerning the Stability and Growth Pact, thus allowing member states to increase public spending to face the crisis in 2020.
The Stability and Growth Pact was then deemed incompatible with the requirements to answer the crisis the European Union is still facing. It is important to note that the Pact is also unfit to deal with the climate and biodiversity crisis and to deliver the European Green Deal. It does not take into account the risks and the impacts of climate change, and they do not promote investments in favour of the green and just transition, as they only focus on economic growth. Fiscal rules were designed to achieve macroeconomic stability and to lower the burden of future generations. Today this means to invest in the just transformation of our economies and societies to keep global warming below 1.5°C.
In order to achieve and go beyond our goal of a reduction of greenhouse gas emissions of at least 55% by 2030, and to reach carbon neutrality well before 2050, the fiscal and budgetary rules must be adjusted to be fit for purpose. For that, a Green Golden Rule securing green spending and incentivising Member States to invest heavily in the green transition must find a way into the European fiscal and budgetary rules. Such a rule would allow Member states to exempt the public spending urgently needed for the just transition from the calculation of their deficit and spending ceilings.