Stability Pact – Macron and Draghi call for fiscal reform with joint article in FT


Leadership in post-Merkel Europe seems to be claimed by Emanuel Macron and Mario Draghi, as evidenced by the article they co-authored in today’s edition of the Financial Times, which addresses a number of EU issues, including managing the economic impact of the pandemic.

For this reason, they are openly in favor of a flexible fiscal policy, given that while the amount of accumulated debt should be reduced, this should not be done through unsustainable, drastic spending cuts or tax increases.

“We need to have enough room for maneuver and opportunity for key spending in the future to secure our sovereignty, including public investment,” they said, calling for reform of current fiscal rules. “They are difficult to understand and too complicated. “They limit the action of governments during crises and burden monetary policy,” the two leaders said.

Of course, increased debts need to be addressed. “There is no doubt that we need to lower their levels. But we can not expect this to happen through higher taxes or unsustainable cuts in social spending, nor can we cut growth through unsustainable fiscal adjustment.”

That is why, they explain, Europe’s strategy should be about cutting public spending, “through sensible structural reforms”.

The French president and the Italian prime minister are also defending the EU’s overall response to the crisis, dismissing allegations that Europe acted belatedly rather than as far as it could go. In fact, they list examples of help, such as the 1.8 trillion. Euros spent to support households and businesses, the huge support package launched by the ECB, and the creation of the Recovery Fund and the Next Generation EU program.

“The recovery is on the way. “The EU economy has not yet returned to the path it was in before the pandemic, but it is in a phase of returning to pre-crisis levels in the coming months.”

However, they call on the European Union to deepen its reform agenda and to make changes and investments in areas such as research, infrastructure, digitalisation and defense.

“We need a development strategy for the EU for the next decade and we must be ready to implement it through joint investment, more effective rules and better coordination, not just in times of crisis,” he said, adding that a new development strategy and a renewed fiscal framework could secure the means for the Union to achieve its ambitious goals.

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