EU economic policy: no barriers to increased public spending and investment

Recovery

(3 March 2021) EPSU joins with the ETUC in stressing that EU Member States need the freedom to boost public spending and investment to support economic recovery and that there should be no return to the previous restrictions imposed by the Stability and Growth Pact (SGP).

The European Commission’s Communication on the fiscal response to the pandemic was presented today, setting out guidance for Member States who have to submit their annual Stability and Convergence Programmes by the end of April.  The current SGP “escape clause” means that the main targets for public spending (deficits of 3% of GDP and debt levels of 60% of GDP) are suspended to allow Member States to support measures to tackle the pandemic and the resulting economic crisis.

Commission Vice President Valdis Dombrovskis said that “Based on current indications, the general escape clause would remain active in 2022 and be deactivated in 2023.” However, that decision will only be confirmed in May following the European Commission’s spring economic forecast.

Economy and finance commissioner Paolo Gentiloni added that: “One year on, the battle against COVID-19 is not yet won and we must ensure that we do not repeat the mistakes of a decade ago by pulling back support too soon. For 2022, it is clear that fiscal support will still be necessary: better to err towards doing too much rather than too little.”

In response, EPSU general secretary Jan Willem Goudriaan said: “We would strongly echo Commissioner Gentiloni’s call not to repeat the mistakes of the past. There should be no return to the austerity that not only undermined the recovery to the last crisis but left our public services ill-prepared for responding to the pandemic.”

He added: “The Commission must confirm that there is no return to the SGP of old. This means not only extending the escape clause to 2023 but to undertake the promised review as soon as possible and not to wait until “the recovery takes hold”. This will only risk imposition of the existing SGP rules.”

EPSU also welcomed the confirmation by the European Commission that any public investment undertaken as part of Member States’ National Recovery and Resilience Plans (NRRPs) should be above and beyond any public investment already planned.

Jan Willem commented: “We very much expect that all 27 NRRPs include substantial measures to boost investment in health and social care and other public services. However, we should also keep our eyes on the longer term and the need to ensure health and social services have the level of staffing and funding that will ensure their resilience in the face of general demographic developments and any future crises. This aim will be undermined with a return to SGP austerity.”

For the reaction of ETUC

 

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