New position on economic governance

The position, which was developed against the background of the currently negotiated reform of the EU economic governance framework, stresses in particular that:

• deficits to no more than 3% of the national GDP and public debt levels to below 60% of national GDP should remain the target for all Member States in the European economic governance.
• at the same time, EU economic governance should be revised to better enable Member States to engage in expenditures when they – as investments – are likely to yield higher returns in the future. This is especially true for the public sector. Public services ensure a continuous, impartial and objective functioning of the state – beyond party politics and elections. EU economic governance should feature a Golden Rule to exempt from deficit calculations certain investments in public services that are required for their crisis resilience and continued performance. Those expenditures in public services are not merely costs, they are investments in the future.
• EU economic governance rules should take a more flexible and a stronger anticyclical approach than in the past. Under a reformed economic governance system, budgetary consolidation should above all be pursued during times of economic booms, and investments should be implemented especially in times of recession.
• when it comes to financing investments without engaging in additional debts, the narrative of the economic governance system should not neglect the role of taxation policy. With every major crisis that Europe has seen during the last two decades, profits tended to be privatised in the hands of a few while deficits were socialised at the expense of public budgets. Therefore, new financial revenue opportunities should be tapped to finance increased public spending. This necessitates the joint closure of loopholes for unethical tax avoidance and illicit tax fraud at the EU level and the recruitment of more tax administration staff in the Member States. The latter should be more highlighted in instruments of the EU economic governance such as the European Semester – along with the need to step up capital taxation (especially compared to labour taxation). In sum, correctly pursued, taxation policy offers ample additional public revenue – coupled with socio-economic fairness for societies.
• independent trade unions and sectoral social partners should be more structurally involved in the roll-out of the European economic governance. This pertains especially to its monitoring and recommendation tool, the European Semester.

CESI Secretary General Klaus Heeger said: “According to the European Commission, the legislative proposals to revise the EU economic governance aim to strengthen public debt sustainability, taking into account the need to reduce much-increased public debt levels, and enhance sustainable and inclusive growth through investment and reforms. As CESI, we support this overarching objective. However, the devil is in the detail. Above all, it is important that we learn from the past crises and realise that we need more enabling conditions for Member States to invest in the resilience of public services – in their facilities, equipment and personnel. It is an investment that will more than pay off in the future. EU economic governance should be sensitive to this.”

The full position is available here.