Future EU economic governance must mark a "turning point", not a "return to normal"

The European Economic and Social Committee (EESC) highlights the need for an urgent reform of the current European economic governance framework, with a view to increasing people's economic and social well-being and ensuring that no one is left behind.

The European Commission's 2020 economic governance review is timely and should pave the way for a comprehensive reform making a "turn" to a revised and rebalanced framework instead of a "return" to normal. In the opinion drafted by Judith Vorbach and Tommaso Di Fazio and adopted at the September plenary, the EESC argues that a new economic policy at EU level is needed, one that focuses on prosperity to promote people's well-being and on a range of key policy objectives such as: sustainable and inclusive growth, full employment and decent work, fair distribution of material wealth, public health and quality of life, environmental sustainability, financial market and price stability, well-balanced trade relations, a competitive social market economy and stable public finances.

Urging the Commission and the Member States to resume their reflection on the current EU rules in the wake of the COVID-19 pandemic, Ms Vorbach said: We urgently need to revise and modernise the economic governance framework. It should be more balanced and have prosperity at its heart, promoting the well-being of people in Europe. Nobody must be left behind. One way to do this is to apply the "golden rule" for public investment to safeguard productivity and the social and ecological base for the well-being of future generations. Further important points are ensuring sufficient public revenues, a fair taxation policy and mitigating the influence of economically questionable indicators on policy-making. Also essential will be a closer involvement of the European Parliament, of the social partners and of civil society as a whole.

Echoing her words, Mr Di Fazio added: The COVID-19 crisis is a massive shock, requiring full financial power. Harmony of purpose is needed to contain the economic and social consequences of this pandemic and to share the burden of the resulting damage equitably within and between Member States. Important short-term measures have already been established, such as the activation of the fiscal framework's general escape clause. However, instead of going for a "return to normal" too quickly, we must take a leap forward and make a "turn" towards a revised economic vision, one that steps up investment in training, research and development, and strategic productive activities.

The Commission's 2020 economic governance review is the second five-yearly assessment of the specific measures, known as the "Six Pack" (2011) and "Two Pack" (2013), introduced since the financial crisis of 2008. In the Committee's view, the report is welcome but incomplete, because it does not give equal consideration to all economic governance tools adopted by the EU and its Member States since 2010 and does not provide a forward-looking perspective.

The Committee also recommends addressing the important question of how to modernise the Treaty-based rules on economic governance at the upcoming Conference on the Future of Europe, stressing that adapting the provisions to the EU's present economic reality should not be taboo. For example, safeguarding price stability now, and very likely also in the near future, will mean avoiding deflation as much as inflation.

According to the EESC, the new economic governance framework should be shaped in such a way as to ensure that fiscal policies target both long-term sustainability and short-term stabilisation, bring about essential productivity reforms, stimulate sustainable investment, value solidarity with responsibility and deepen the Economic and Monetary Union. This was also pointed to as the way forward by European Commission president Ursula von der Leyen in her first State of the Union speech on 16 September 2020: Our economies need continued policy support and a delicate balance will have to be struck between providing financial support and ensuring fiscal sustainability. In the longer term there is no better way to stability and competitiveness than through stronger Economic and Monetary Union.