EPSU backs call for social and green public spending rules

Manifesto 15 March

(15 March 2022) EPSU today joins with over 270 trade unions, civil society and other campaigning organisations and individuals in calling for fundamental reform of EU rules that regulate public spending and investment.

The manifesto for a green, just and democratic European economy is launched today, sending a clear message to the meeting of EU finance ministers that they need to adopt a new approach to economic policy and, in particular, the fiscal rules that apply to member states.

As with the COVID-19 pandemic, the impact of the war in Ukraine is forcing the EU to take urgent action to support the European economy and adapt the way it approaches economic policy coordination. Key elements of the fiscal rules that have been in place for over 30 years – adapted and made stricter in response to the 2008-09 global financial crisis – were suspended in 2020. This allowed member states the flexibility to boost public spending and investment in response to the pandemic. The case for this suspension to continue until new rules are in place is stronger than ever.

With the Commission hinting that economic governance would return to normal in 2023, EPSU, along with the ETUC, had already argued that the escape clause that suspended the fiscal rules should remain in force until a full review of the economic governance process had been undertaken.

EPSU strongly supports the manifesto argument that the aim of European economic policy should not be to simply reduce debt. Climate change, increasing inequalities, the impact of the pandemic and now the fallout from the conflict in Ukraine require a different approach. The EU’s fiscal framework should fully support just transitions and a systemic transformation of our economies.

EPSU general secretary, Jan Willem Goudriaan said: “We cannot go back to austerity. It means our public services will go unfunded, staff shortages like those in health and care will continue, investment in measures to address climate justice and investment in social infrastructure will not happen.

The existing rules impose persistent constraints on public spending, depressing employment and investment and in many countries unemployment rates, especially youth unemployment rates, are still at unacceptable levels. 

They also fall short of ensuring we can adapt to, and mitigate climate change through a just transition, requiring, according to the European Commission’s own estimates at least €520 billion. This cannot be achieved without substantial public funding but the imposition of arbitrary fiscal limits make this target unreachable.

Along with Manifesto supporters, EPSU is warning that reinstating the old rules would lead to a renewal of austerity and this would seriously jeopardise the recovery from the socio-economic impacts of the pandemic. It would further deepen social inequalities and erode the citizens’ trust in the EU.

EPSU has joined with the ETUC and many other organisations in responding to the European Commission’s economic governance review, calling for a deep reform of the process. EPSU’s response said that:

The urgent need to tackle climate change goes to the core of the issue and has to be a factor in the assessment of debt sustainability. Governments need to act in the short-term with measures that will require massive public investment and increased borrowing and this has to be recognised in the new system of economic governance.

The EPSU submission also underlined the importance of taking a broader approach to public finance and not just put the spotlight on spending and debt:

As for public revenues, taxation policy needs to be discussed. The scope for national governments to boost income by increasing some tax rates, broadening the tax base and/or introducing new and progressive forms of taxation has to be a factor in determining the short and long-term sustainability of public finances.

Over the coming months EPSU will be working hard with the ETUC and Manifesto signatories to get our points across to the European institutions and member states to try to ensure that Europe makes a significant shift in its economic policy.