In this joint letter, NGOs, trade union representatives as well as academics and researchers call on the EU to rethink and realign the EU’s fiscal framework with the challenges ahead: Tackling all the current crises – heath, social, economic as well as climate – requires a profound shift in focus from debt reduction and balanced budgets to creating well paid green jobs, reducing inequality, lifting millions out of poverty, and implementing much needed green infrastructure projects.
To: President of the European Council, Charles Michel; President of the Eurogroup, Paschal Donohoe; President of the European Commission, Ursula Von der Leyen; Chair of the Economic and Financial Affairs Council, João Leão; Commission Executive Vice-President, Valdis Dombrovskis; Commissioner, Paolo Gentiloni; Commissioner, Mairead McGuinness; Permanent Representatives and Ambassadors to the European Union, Wilem van de Voorde; Dimiter Tzantchev, Edita Hrdá; Jonas Bergin Liisberg; Michael Clauss; Aivo Orav; Declan Kelleher; Ioannis Vrailas; Pablo García-Berdoy; Philippe Léglise- Costa; Irena Adrassy; Maurizio Massari; Nicholas Emiliou; Sanita Pavļuta-Deslandes; Simonas Šatūnas; Georges Friden; Tibor Stelbaczky; Marlene Bonnici; Robert de Groot; Nikolaus Marschik; Andrzej Sadoś; Nuno Brito; Luminiţa Teodora Odobescu; Iztok Jarc; Maria Malová; Marja Rislakki; Lars Danielsson. 15th February 2021
Dear President/ Chair/ Commission Executive Vice-President/ Commissioner/ Permanent Representatives and Ambassadors,
We are currently in the midst of the greatest health, social, and economic shock of our lifetimes. The policy agenda set in the emergency and recovery phase in the year ahead will have profound socio- economic effects, determining the shape of our economy long after the pandemic is over. At the same time, we cannot afford to address one crisis whilst ignoring another – by leaping out of the COVID frying pan into the climate fire. Indeed, there is no vaccine for environmental breakdown.
To be consistent with the Green Deal and a socially just transition, to build up a resilient economy that works for people, and to decarbonize it within the timespan of only one generation, massive and well- designed investments are needed over the long run. A return to business as usual – the revival of failed austerity policies of the past – is simply not an option. We must build back better, so that all European member states are stronger coming out of the COVID crisis than they were going in. This year stands before us as a unique opportunity to do things differently and start a fresh chapter to European policy making.
Fortunately, the European Commission has launched its economic governance review – which will review the EU’s main fiscal framework, the Stability and Growth Pact and subsequent fiscal legislation. As academics, civil society, trade union leaders, and citizens, we are deeply concerned that the current fiscal framework prioritises debt reduction and balanced budgets over much more important human, economic and environmental outcomes – like creating well paid green jobs, reducing inequality, lifting millions out of poverty, and implementing much needed green infrastructure projects. We desperately need a complete overhaul of the current approach to fiscal policy to reshape our economies and tackle the unprecedented challenges facing the EU head on.
Lessons need to be drawn from previous policy failures. The set-up of our fiscal framework transformed the 2008 global financial shock into a self-made economic crisis and an unnecessarily prolonged recession. It resulted in years of public and private under-investment, hampering our environmental goals whilst prompting a surge in inequality between and within countries of the Union. By stifling employment opportunities and household incomes, it is no secret our fiscal framework helped fan the flames of populism and raised significant questions around the democratic nature of the European set-up. Ultimately, the irreparable harm left so many ordinary people more vulnerable to future potential shocks, like the COVID crisis.
The scale of the crisis and severity of the economic downturn forced the temporary suspension of fiscal rules – simplistic and arbitrary limits for public debt and borrowing. To protect European citizens and businesses, to support the economy following the pandemic, the Commission deemed – and Member States agreed – more fiscal flexibility was necessary than permitted under our fiscal framework. Meanwhile, the NextGenerationEU package and the Recovery and Resilience Facility were agreed; recognising that the European Union needs a flexible and sizable central budget to address imbalances between countries and enhanced upwards social and economic convergence.
But the conditions that warranted these temporary measures were true before and will remain long after the crisis is over. It is therefore vital that the old fiscal framework is not reapplied before new economic governance and flexible principles to coordinate fiscal policies within the Union are agreed. Rejuvenating and re-establishing fiscal policy as the primary tool of macroeconomic management deserves an open and public debate.
Fiscal policy should be an enabler, not the chain that holds economies back. Our fiscal framework needs to be aligned, not at odds, with stated goals of full employment and environmental protection laid out in the Treaty of the European Union. Whilst welcome, an enhanced EU level budget alone will not be enough to meet these goals, national fiscal policy must be empowered too. Indeed, as we continue to face growing uncertainties, arbitrary numerical fiscal rules are simply not fit for purpose.
Tinkering around the edges with incremental changes will fall wide of the mark. The European Commission needs to seize the current narrow window of opportunity to spearhead a significant paradigm and narrative shift. It is all the more urgent to turn fiscal policy from an end to a means, and think more functionally about what the wider economy, society and the planet we inhabit really need. Getting policy right in this area is one of the single most important priorities for recovering from Europe’s greatest peacetime recession and addressing social and ecological challenges.
We realise that the reform will not be simple and completed over night. We ask you to use the following principles as a bedrock when rethinking the current fiscal framework. We believe that if these principles are not met – you are going to fail the people and future generations of Europe.
- Member States are fiscally enabled and incentivized to flexibly reach the goals of full- employment with decent jobs and a socially just green transition, making sure no one is left behind.
- A sizable and permanent community EU budget and borrowing capacity is established for promoting investment supportive of the Green Deal and a socially just transition.
- A coordinated interaction of fiscal and monetary policy is made possible: governments take a primary role in macro stabilization. The ECB pursues an accommodative stance that supports democratically decided fiscal objectives, allowing member states to take full advantage of the fiscal potential afforded to them by monetary policy.
Of course, looking only at the sheer quantity of borrowing is not sufficient. Public spending and revenues cannot simply be aimed at providing measures to boost GDP growth with no consideration of the impact on future public prosperity or resilience. Economic and fiscal policy need to be primarily guided through a lens of broader public good and wellbeing, reducing inequality and meeting ecological commitments
Far from making fiscal policy more responsible, the current fiscal framework is the exemplar of irresponsibility – the EU’s consistent failure to meet its own goals on environmental protection and full employment are indicative of this. The price of inaction will prove far more costly to governments and society in the long run. We have high hopes and we are looking forward to an open-minded debate without prejudice. No stone should be left unturned. You can count on our support in delivering this transformative agenda, and we look forward to your next steps.
Signatories
NGOs, think-tanks and foundations: Miatta Fahnbulleh, Chief Executive, New Economics Foundation Benoit Lallemand, Secretary General, Finance Watch Silja Markkula, President, European Youth Forum Jeremy Wates, Secretary General, European Environmental Bureau Nicolas Hulot, former French Minister for green and social transition, Honorary President, Fondation pour la nature et l’ homme Jorgo Riss, Greenpeace Nick Bryer, 350.org Wendel Trio, Director, Climate Action Network (CAN) Europe Michael Vincent, President, Greentervention Barbara Unmüßig, President, Heinrich-Böll-Stiftung, Germany George Soros, Chair, Open Society Foundations Robert Johnson, President, Institute for New Economic Thinking Jakob Hafele, ZOE-Institute for Future-fit Economies Malcolm Williams, Zero Waste International Alliance Alain Grandjean, President, Fondation Nicolas Hulot pour la nature et l’ homme Andras Lukács, Clean Air Action Group Wojtek Kalinowski, Co-director, Veblen Institute for Economic Reforms Domantas Tracevičius, Founder, VšĮ “Žiedinė ekonomika” Dr. Umed Temursho, IOpedia, Spain Arnaud Schwartz, President, France Nature Environnement Jeremie Fosse, President, eco-union, Spain Francisco Ferreira, President, ZERO – Association for the Sustainability of the Earth System (Portugal) Stanislas Jourdan, Executive Director, Positive Money Europe Miljenka Kuhar (Director) – Society for Sustainable Development Design – DOOR David Boyle, Co-director, New Weather CIC Fernando Ferrando (President) – Fundación Renovables, Spain Michal Len, Director, RREUSE Paula Nunes da Silva, President, Quercus ANCN Fran Boait, Positive Money UK Laurent Morel, Président de l’Institut Français pour la Performance du Bâtiment Jordi Ibáñez, Director, Fundación Finanzas Éticas, Spain Ákos Éger, executive president, National Society of Conservationists – Friends of the Earth Hungary Konsta Nylander, Chairman, Talousdemokratia – Economic Democracy Finland Nicolas Dufrêne, director, Institut Rousseau Shahin Vallee, German Council on Foreign Relations, Head of the Geo-Economics Programme Leyla Larbi, SumOfUs Mathis Richtmann, Dezernat Zukunft Dr. Christoph Gran, ZOE-Institute for Future-fit Economies Jean-Marc Jancovici, President, The Shift Project Les Économistes atterrés, France Morgane Créach, Directrice du Réseau Action Climat, France
Trade Unions: Luca Visentini, General Secretary, ETUC Laurent Berger, ETUC President and General Secretary, CFDT, France Reiner Hoffmann, President of the German Confederation of Trade Unions (DGB-Germany) Wolfgang Katzian, President of Austrian Trade Union Confederation (ÖGB) Unai Sordo, General Secretary of the CCOO, Spain Pepe Alvárez, General Secretary Unión General de Trabajadores de España (UGT-Spain) Joaquín Pérez da Silva, General Secretary Unión Sindical Obrera (USO-Spain) Miranda Ulens, General Secretary of the General Labour Federation of Belgium (FGTB-ABVV) Marie-Hélène Ska, General Secretary, Confédération des Syndicats Chrétiens (CSC-Belgium) Annamaria Furlan, General Secretary, CISL-Italy Sylvain Hoffmann, Director, Chambre des salariés Luxembourg Jarkko Eloranta, President, Central Organisation of Finnish Trade Unions (SAK) Yannis Panagopoulos, GSEE President, Greece Plamen Dimitrov, President, CITUB Inga Ruginiene, President, Lithuanian Trade Union Confederation (LPSK) Melinda Doszpolyné Mészáros, President, LIGA-Hungary Imre Palkovics, President, MOSZ-Hungary László Kordás, President, MASZSZ-Hungary Csaba Csóti, President of the Forum for the Co-operation of Trade Unions (SZEF) Hungary Jan Willem Goudriaan, General Secretary of the European Federation of Public Service Trade Unions (EPSU) Larry Flanagan, President, European Trade Union Committee for Education (ETUCE) Agostino Siciliano, General Secretary, FERPA (European Federation of Retired and Elderly People) Ricardo Gutiérrez, General Secretary, European Federation of Journalists (EFJ) Yvan Ricordeau, National Secretary in charge of European and international affairs, CFDT, France Oliver Röpke, President of the EESC Workers’ Group Javier Doz, President of the EESC’ European Semester Group Luc Mathieu, General Secretary, CFDT Bank and Insurance, France Nora Back, OGBL Luxemburg Pierpaolo Bombardieri, General Secretary, Italian Union of Labor (UIL)
Academics and researchers: Olivier De Schutter, UCLouvain and UN Special Rapporteur on extreme poverty and human rights Dr. Philipp Heimberger, Vienna Institute for International Economic Studies Dr Lars Ahnland, Stockholm University, Sweden Sergio Rossi, Full Professor of Economics, University of Fribourg, Switzerland Prof Tim Jackson, University of Surrey Dr. Dirk Ehnts, Pufendorf-Gesellschaft e. V. Laurence Scialom, Professor University Paris Nanterre Benjamin Braun, Max Planck Institute for the Study of Societies Simon Wren-Lewis, Emeritus Professor of Economics, Oxford University. James K. Galbraith, The University of Texas at Austin Professor Stephany Griffith-Jones,IDS, Sussex University and IPD, Columbia University Professor Steve Keen, Institute for Strategy, Resilience and Security, University College London, UK Saskia Sassen, Professor, Columbia University, New York Malcolm Sawyer, Emeritus Professor of Economics, University of Leeds, UK Richard Murphy, Tax Research LLP and Visiting Professor of Accounting, University of Sheffield Gary Dymski, University of Leeds Rens van Tilburg, Sustainable Finance Lab at Utrecht University Asker Voldsgaard, University College London Dr Neil Lancastle, De Montfort University, Leicester, UK Dominik Leusder, London School of Economics Professor Nigel Dodd, London School of Economics Dr Lorena Lombardozzi, The Open University UK Dr Daniela Tavasci, Queen Mary University of London, UK Professor Felix FitzRoy, University of St. Andrews Nicholas Haagensen, Postdoc at iCourts, University of Copenhagen Jens van ‘t Klooster, KU Leuven Dr Jorge Garcia-Arias, University of Leon, Spain Dr Nina Eichacker, University of Rhode Island, Kingston, RI USA Dr. Thomas Marois, UCL Institute for Innovation and Public Purpose Dr. Phil Armstrong, Gower Initiative for Modern Money Studies Professor Emeritus Machiko Nissanke, SOAS, University of London Professor Emeritus François Morin, University of Toulouse José Bruno Fevereiro. The Open University and Goldsmiths College, UK Dr. Daniele Tori, The Open University Business School, UK Andrew Sayer, Emeritus Professor, Lancaster University, UK Dr Adam Barrett, University of Sussex, UK Marco Missaglia, Professor of Economics, University of Pavia Dr Jim Jin, University of St Andrews Sergio Cesaratto, Full professor, University of Siena (Italy) Thibault Laurentjoye, Robert de Sorbon Foundation, Paris. Dr Adrian Bua, De Montfort University Dr Andy Denis, City, University of London Josh Ryan-Collins, UCL Institute for Innovation and Public Purpose John T. Harvey, Professor and Chair of Economics, Texas Christian University Dr Elisa Van Waeyenberge, co-Head of Economics Department, SOAS University of London José Pérez-Montiel, University of the Balearic Islands Prof. Leonard Seabrooke, Copenhagen Business School Duncan Wigan, Professor MSO Copenhagen Business School Dr Muhammad Ali Nasir, University of Huddersfield Prof Joscha Wullweber, Witten/Herdecke University Simon Schairer, ICDD, University of Kassel Nikolaos Filippakis, Hellenic Mediterranean University Professor Mehmet Asutay, Durham University Business School Dr. Matthias Kroll, World Future Council Prof. Rosaria Rita Canale, University of Naples “Parthenope” Prof. Gennaro Zezza, University of Cassino Thorvald Grung Moe, Levy Economics Institute Prof. Antonella Stirati, Università Roma Tre Ryan Bellinson, UCL Institute for Innovation and Public Purpose Prof. Dirk Bezemer, Groningen University Prof. Nicola Acocella, Sapienza University of Rome Dr. Andrew M. Fischer, Erasmus University Rotterdam Etienne Lebeau, Centrale nationale des employés (Belgium) Dr. Moutaz Altaghlibi, Sustainable Finance Lab, Utrecht University. Professor Emeritus Hans Schenk, Dept. Economics, Utrecht University Prof. Irene van Staveren, Erasmus University Rotterdam Dr. Thiemo Fetzer, University of Warwick Dr. Matthieu Méaulle, Membre Associé PHARE/CNRS, University Paris 1 Panthéon-Sorbonne Prof. Jesus Ferreiro, University of the Basque Country UPV/EHU Prof. Em. Joseph Huber, Martin Luther University Halle, Monetative Berlin Dr Andrew Jackson, University of Surrey Andreas Maschke, University of Leeds Dr Paul Segal, King’s College London Dr. Michael Paetz, Hamburg University Dr Graeme Smith, The Open University, UK. Prof. Roberto Veneziani, Queen Mary University of London Dr. Janis Brizga, University of Latvia Jim Richard Surie, MSc, Sustainable Finance Lab Dr Max Krahé, University of Duisburg-Essen Professor Martyn Barrett, University of Surrey, UK Mogens Ove Madsen, Aalborg University Prof. em. Jesper Jespersen, Roskilde University, Denmark Dr Jonathan Perraton, University of Sheffield, UK Dr Maria Nikolaidi, University of Greenwich, UK Dr Yannis Dafermos, SOAS University of London, UK Inge Røpke, Professor, Aalborg University, Denmark Dr. Herman Wijffels, emeritus professor Utrecht University Plamen Ivanov, University of Winchester Prof Dr Johannes Schmidt, Karlsruhe University of Applied Sciences Michael Jacobs, Professorial Fellow, Sheffield Political Economy Research Institute, University of Sheffield, UK Michel Dévoluy, Professeur honoraire, Université de Strasbourg Alexandre Rambaud, AgroParisTech-CIRED / Université Paris-Dauphine Jean-Michel Servet, professeur honoraire IHEID Genève, Université Lumière Lyon 2 Thomas Lagoarde-Segot, KEDGE BS, SDSN France Ivar Ekeland, Université Paris-Dauphine Prof Christophe Revelli, KEDGE BS Roland Pérez, professeur émérite, Université Montpellier, France Jérôme Trotignon, Université de Lyon, France Henri Sterdyniak, Sciences Po, Paris. Eve Chiapello, EHESS, Paris Jean-François Ponsot, Pacte-CNRS Univ. Grenoble Alpes Luis Reyes, Kedge BS Claude Simon, Professeur émérite, ESCP Business school. Prof Michael Roos, Ruhr-Universität Bochum, Germany Dr Hugues Chenet, UCL Institute for Sustainable Resources (UK), Chaire Energie et Prospérité (FR) Jean-Marie Harribey, économiste, Université de Bordeaux Anne Eydoux, Cnam, Paris Dr. Virgile Perret, Geneva Ivar Ekeland, Université Paris-Dauphine
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