Italian Prime Minister Mario Draghi and French President Emmanuel Macron have called on the EU to reform its fiscal rules.
In joint article published yesterday on the Financial Times, the two argued that even before the pandemic, the bloc’s fiscal rules were in need of reform as they are “too obscure and excessively complex”, constraining “the actions of governments during crises” and overburdening “monetary policy.”
“They also failed to provide incentives for prioritising key public spending for the future and for our sovereignty, including public investment,” Draghi and Macron wrote.
According to the European Commission, after a 6.2 per cent rebound this year, Italy’s GDP growth is expected to moderate to 4.3 per cent in 2022 and 2.3 per cent the following year. France will follow a similar path settling to 4.2 and 2.1 per cent in 2022 and 2023 respectively.
To act boldly and quickly against rising challenges – including climate change and geopolitical tensions – Europe will need a fiscal framework “that is credible, transparent and capable of contributing to our collective ambition for a stronger, more sustainable and fairer Europe.”
“There is no doubt that we must bring down our levels of indebtedness,” they argued. “But we cannot expect to do this through higher taxes or unsustainable cuts in social spending, nor can we choke off growth through unviable fiscal adjustment.”
The French president and the Italian prime minister have instead suggested to curb current spending through structural reform, including debt raised to finance future investments which “actually contributes to debt sustainability over the long run.”
The article is expected to reignite discussions just as the Commission launched a consultation over its fiscal framework.