Reforming the Fiscal Rules: A radical shift or short shrift? The EU Commission has relaunched its review of the eurozone’s fiscal rules. Announced with something of a whisper, expect a lot of raised voices in the coming months. Sinn Féin Spokesperson for Public Expenditure and Reform, Mairéad Farrell TD, writes. Thankfully, the fiscal rules of the European Monetary Union were suspended at Covid’s onset and will not return until 2023. For the uninitiated, the rules place limitations on members’ debt/deficit levels. As such they have a significant impact on economic performance. Two of the principal requirements are firstly, budget deficits below 3 per cent of GDP and secondly, debt to GDP ratios below 60 per cent. Their suspension allowed states to undertake the necessary countercyclical spending needed to address the pandemic. Nearly 30 years old, as long as the rules have been with us, so too have been calls for reform. It is speculated the Commission will propose their simplification, greater incentives for productive investment, and changes to debt-to-GDP ratios. Submissions from members states are being sought
28
eolas issues
and it is essential we have our say. As the IMF pointed out, we are facing a future of considerable uncertainty. Uncertainty for our low corporate tax model, corporate tax revenues, and environmental performance. Going forward, when it comes to economic growth, if we are to achieve growth that is sustainable, inclusive, and leads to shared prosperity, we will increasingly have to ‘grow our own’. This requires an entrepreneurial state with visionary/strategic public investments distributed across the innovation chain, which create synergy between the state and private sector, and positive spill overs raising the animal spirits of entrepreneurs. However, the rules as currently constituted will act as a barrier to that, straitjacketing not only our national efforts to achieve a Just Transition/Green New Deal, but wider European efforts.
Credit: Sinn Féin
issues eolas
