EPSU urges vote against EU’s new fiscal rules

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(3 April 2024) EPSU has joined the ETUC and other trade union and civil society organisations in rejecting new EU rules on public finance that threaten a return to austerity.

MEPs will discuss the latest proposals in the last week of April and EPSU and the ETUC are calling on them to vote against the legislation or risk seeing governments across Europe having to cut public spending and investment.

ETUC General Secretary Esther Lynch warned at the beginning of this year that the new rules could be disastrous for the economy, for the environment and for social progress. She said: “At a time when Europe should be investing in a green future, plans to reintroduce austerity would return Europe to its darkest period.” She added: “Governments should be honest about what this will mean for their citizens: a huge number of job cuts, lower wages and worse working conditions, and further underfunding of public services.

At the core of the new rules, as with earlier economic governance legislation, are the debt and deficit targets that governments need to meet. As before the key figures remain a spending deficit of no more than 3% of economic output (GDP) while the debt target remains at 60% of GDP.

The rules were reviewed in 2020 and the European Commission report of the consultation, with considerable input from trade union organisations, noted that there were widespread calls for more flexibility in the system, for it to be adapted to each country and for account to be taken of the needs of social and environmental spending.

While the Commission proposals that emerged last year were a step in the right direction, developments in the European Parliament and Council have involved some backward steps, not least the continuing focus on the 3% and 60% thresholds with specific numerical steps and timetables for member states to reach and go below these figures.

The legislation in its current form is specific about the trajectory to be taken by member states whose debt is above 90% of GDP and who are required to reduce it by 1% a year while those with debt between 60% and 90% of GDP who must reduce it by 0.5% a year. In addition, the legislation introduces in effect a new target – the deficit resilience safeguard. This means that while the 3% figure remains, member states are actually required to move towards a 1.5% deficit target.

Member states will have until 20 September to draw up fiscal-structural plans which should set out how they will meet the targets. These plans cover a four-year period but could be extended to seven years, depending on member states’ commitment to reforms and investments that meet EU priorities.

There are some mitigating elements within the new legislation. For example, member states should: “ensure that the planned overall level of nationally financed public investment over the lifetime of the national medium-term fiscal-structural plan is no lower than the medium-term level before the period of that plan taking into account the scope and scale of the country-specific challenges.” This is a positive requirement although by focusing on previous trends does not address the fact that if member states are to address the massive challenges of climate change then public investment needs to be well above those trends.

A study by the ETUC and the New Economics Foundation (NEF), due to be published next week, will reveal the scale of the social and environmental investment gap across Europe. On the basis of the new legislation, the ETUC and NEF calculate that only three countries will be able to meet their national investment needs while also complying with the demands of the revised fiscal rules.

EPSU General Secretary Jan Willem Goudriaan said: “National governments need to spend and invest to defend and improve our public services, not least to address the urgent staffing shortages, particularly in health and social care. There mustn’t be a return to the austerity that followed the economic and financial crisis and that had devastating effects on public service workers and the quantity and quality of services they provide.”