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The EU faces the challenge to combine large and sustained investments to promote the transition towards a green, digital, and competitive Europe while maintaining fiscal sustainability. Based on a comprehensive literature review on the effects of fiscal rules and investment clauses on public finances, this in-depth analysis provides some guidance how higher public investments can be achieved by a targeted golden rule without harming fiscal sustainability in the EU fiscal framework. The study also ...

The Commission’s reform orientations propose that debt sustainability analysis (DSA) should serve as an anchor in EU fiscal rules. After discussing the main assumptions of DSAs in projecting public debt ratios, we analyse four critical aspects in designing such a reform: making judgement calls with regard to DSA assumptions; ensuring transparency and democratic legitimacy; promoting public investment in the context of climate goals; and tackling cross-border effects of fiscal policy, in particular ...

The necessary green transition in the EU requires substantial additional green public investment (GPI) by Member States throughout this decade and beyond. This briefing paper discusses four approaches for a reform of EU fiscal rules to better accommodate higher (debt-financed) GPI: (1) an exemption clause for GPI; (2) the implementation of a green golden rule; (3) a country-specific benchmark share of government expenditures dedicated to GPI recommended by the European Commission; and (4) an EU Climate ...

A special treatment for certain types of investments, such as green investments, in the European fiscal framework may be justified on the ground that there are priority objectives such as the future health of the planet. An “investment clause”, less restrictive than the existing one, can be envisaged for projects that are co-financed, financed or guaranteed by the European Union or by European Union Institutions, such as the European Investment Bank.

The Communication by the European Commission to reform the Economic Governance Framework offers welcome headspace for public investment, while avoiding the de jure adoption of a ‘targeted Golden Rule’ as this could conflict with national accounting conventions. However, even with this reform, EU-strategic goals for public investment risk to be missed once the Recovery and Resilience Facility (RRF) runs out. Making a RRF-like instrument a permanent feature of the EU’s fiscal landscape could be a way ...

This is the seventh edition of an annual EPRS publication aimed at identifying and framing some of the key issues and policy areas that have the potential to feature prominently in public debate and on the political agenda of the European Union over the coming year. The topics analysed encompass the 2024 European elections, budgeting in times of crises and war, lessons for public investment in the EU from the EU recovery instrument, the fiscal and monetary policy mix, climate and socio-economic tipping ...

Die Darlehensfazilität für den öffentlichen Sektor ist neben dem Fonds für einen gerechten Übergang und der Übergangsregelung im Rahmen von InvestEU die dritte Säule des Mechanismus für einen gerechten Übergang. Die Darlehensfazilität für den öffentlichen Sektor umfasst eine Finanzhilfe- und eine Darlehenskomponente. Mit einem Beitrag von 1,525 Mrd. EUR für die Zuschusskomponente aus dem Unionshaushalt und Darlehen der Europäischen Investitionsbank in Höhe von 10 Mrd. EUR aus eigenen Mitteln sollen ...

In the context of the review of the EU economic governance framework, this study recommends a multi-year ahead expenditure rule anchored in an appropriate public debt target, augmented with an asymmetric golden rule that provides extra fiscal space only in times of a recession. An improved governance framework should strengthen national fiscal councils and include a European fiscal council, while financial sanctions should be replaced with instruments related to surveillance, positive incentives, ...

This paper discusses the analytical basis for facilitating green public investment under the Stability and Growth Pact fiscal rules. It concludes that additional public debt created by deficit-financed green public investment is likely to increase fiscal sustainability risks. However, such additional risks could be justified to avoid the economic damages (which would also have long run consequences for public finances) arising in the absence of sufficient green public investment. Tre trade off could ...

This study argues that to achieve the necessary green transition in the EU, additional public investment by Member States will need to be mobilised throughout the next decade. In light of the macroeconomic environment of very low interest rates, this calls for a reform of the EU fiscal framework. The paper discusses three approaches for a reform of the fiscal rules to better reflect the need for higher (debt-financed) green public investment: (1) an exemption clause for green public investment; ( ...