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Real Economy: Examining the role of fiscal rules in a new growth model for Europe

The latest episode of Euronews’ Real Economy asks whether the time has come for a shakeup in European rules on taxation and spending.

date:  12/03/2020

See alsoFiscal Rules: Towards a new growth model...

With a rising need for investment to boost domestic demand, some European governments such as Germany, the Netherlands and Finland are under pressure to raise their spending as they are the only ones with the fiscal space to do so. There is now open debate in the EU on the reforms needed to the fiscal rulebook. According to Economy Commissioner Paolo Gentiloni, “…these rules were designed at a time of the most dangerous and severe post-war economic crisis in Europe…now we are at a different moment…[so] I think the rules should be adapted to this new framework, and to this new situation.” Mr. Gentiloni does not believe that the current fiscal targets should be changed but expresses a degree of frustration that the Commission cannot compel countries to invest. “The Commission has been recommending for several years that this fiscal space be used for investment,” he says. Becoming the first climate-neutral bloc in the world by 2050 will require significant investment, but Gentiloni does not think that Green investments should be excluded from deficit rules. Moreover, while more simplified rules are needed in order to address new challenges in the bloc such as climate change or the need to speed-up growth, to Commissioner Gentiloni the biggest challenge remains the same - making sure different Members States are on the same page over fiscal reform.