The fiscal room for manoeuvre of Member States could be fundamentally shaped by new EU rules, the main principles of which were adopted by the Council of Economic and Finance Ministers (ECOFIN) on 14 March. A broad coalition of civil society organisations is calling for the new rules to require climate proofing and to impose strict anti-corruption conditions.

EU finance ministers plan to make the process by which Member States must achieve a level of public debt below 60 percent of gross domestic product (GDP) and an annual budget deficit of 3 percent more flexible and transparent.

The Brussels-based Climate Action Network Europe (CAN Europe), which has 170 NGOs (including the Clean Air Action Group) as members, stresses in a statement that the EU plans to indiscriminately stimulate GDP growth to reduce the debt-to-GDP ratio promotes an economic model that is not in line with the EU's climate commitments. Yet it is the climate crisis that poses a huge risk to public finances, as it could disrupt economic life.

András Lukács, President of Clean Air Action Group, said: “A reformed EU economic governance framework must encourage governments to eliminate environmentally harmful subsidies, such as public subsidies for new stadiums, luxury hotels, motorways, battery factories, as well as to increase taxation of heavily polluting activities. The extra revenue thus generated should be used to compensate those in need and for environmental purposes. Among these, the modernisation of buildings is a priority, as this will greatly help to mitigate the effects of the climate and energy crisis.”

Zoltán Pogátsa, board member of the Clean Air Action Group, added: “The ratio of public debt to GDP does not in itself say much. Japan has a 260% debt to GDP ratio and yet its economy is thriving, while Argentina was in an economic crisis even with a 60% ratio. So, if the other conditions are right, it is possible to increase support for climate investment or improve the social system even with a relatively high debt-to-GDP ratio. This is why new EU rules should take into account a more complex mix of indicators in order to determine whether a debt is risky or not. In no case should investments and reforms proposed by Member States be harmful to climate or the environment.”

The NGOs say that the Do No Significant Harm science-based criteria should be used to screen investments and reforms that a government proposes to benefit from a longer debt reduction pathways. The leaders of the Member States meeting on 23-24 March should take into account the multiple crises facing us when deciding whether to endorse the Finance Ministers’ position on the EU’s economic governance reform.

Recently, a joint webinar on this topic was organised by the Clean Air Action Group and the Hungarian Economic Society, which can be viewed on Youtube.

Some days later a press meeting was arranged on the topic by the Hungarian International Press Association with the participation of András Lukács and Zoltán Pogátsa (voice recording can be accessed here).