An open letter sent on Monday 15 February to European Union leaders asking them to review the EU’s economic governance.
To: President of the European Council, Charles Michel; President of the Eurogroup, Paschal Donohoe; President of the European Commission, Ursula Von der Leyen; Chair of the Economic and Financial Affairs Council, João Leão; Commission Executive Vice-President, Valdis Dombrovskis; Commissioner, Paolo Gentiloni; Commissioner, Mairead McGuinness; Permanent Representatives and Ambassadors to the European Union, Wilem van de Voorde; Dimiter Tzantchev, Edita Hrdá; Jonas Bergin Liisberg; Michael Clauss; Aivo Orav; Declan Kelleher; Ioannis Vrailas; Pablo García-Berdoy; Philippe Léglise Costa; Irena Adrassy; Maurizio Massari; Nicholas Emiliou; Sanita Pavļuta-Deslandes; Simonas Šatūnas; Georges Friden; Tibor Stelbaczky; Marlene Bonnici; Robert de Groot; Nikolaus Marschik; Andrzej Sadoś; Nuno Brito; Luminiţa Teodora Odobescu; Iztok Jarc; Maria Malová; Marja Rislakki; Lars Danielsson.
15th February 2021
Dear President/ Chair/ Commission Executive Vice-President/ Commissioner/ Permanent Representatives and Ambassadors,
We are currently in the midst of the greatest health, social, and economic shock of our lifetimes. The policy agenda set in the emergency and recovery phase in the year ahead will have profound socio economic effects, determining the shape of our economy long after the pandemic is over. At the same time, we cannot afford to address one crisis whilst ignoring another – by leaping out of the COVID frying pan into the climate fire. Indeed, there is no vaccine for environmental breakdown.
To be consistent with the Green Deal and a socially just transition, to build up a resilient economy that works for people, and to decarbonize it within the timespan of only one generation, massive and well designed investments are needed over the long run. A return to business as usual – the revival of failed austerity policies of the past – is simply not an option. We must build back better, so that all European member states are stronger coming out of the COVID crisis than they were going in. This year stands before us as a unique opportunity to do things differently and start a fresh chapter to European policy making.
Fortunately, the European Commission has launched its economic governance review – which will review the EU’s main fiscal framework, the Stability and Growth Pact and subsequent fiscal legislation. As academics, civil society, trade union leaders, and citizens, we are deeply concerned that the current fiscal framework prioritises debt reduction and balanced budgets over much more important human, economic and environmental outcomes – like creating well paid green jobs, reducing inequality, lifting millions out of poverty, and implementing much needed green infrastructure projects. We desperately need a complete overhaul of the current approach to fiscal policy to reshape our economies and tackle the unprecedented challenges facing the EU head on.
Lessons need to be drawn from previous policy failures. The set-up of our fiscal framework transformed the 2008 global financial shock into a self-made economic crisis and an unnecessarily prolonged recession. It resulted in years of public and private under-investment, hampering our environmental goals whilst prompting a surge in inequality between and within countries of the Union. By stifling employment opportunities and household incomes, it is no secret our fiscal framework helped fan the flames of populism and raised significant questions around the democratic nature of the European set-up. Ultimately, the irreparable harm left so many ordinary people more vulnerable to future potential shocks, like the COVID crisis.
The scale of the crisis and severity of the economic downturn forced the temporary suspension of fiscal rules – simplistic and arbitrary limits for public debt and borrowing. To protect European citizens and businesses, to support the economy following the pandemic, the Commission deemed – and Member States agreed – more fiscal flexibility was necessary than permitted under our fiscal framework. Meanwhile, the NextGenerationEU package and the Recovery and Resilience Facility were agreed; recognising that the European Union needs a flexible and sizable central budget to address imbalances between countries and enhanced upwards social and economic convergence.
But the conditions that warranted these temporary measures were true before and will remain long after the crisis is over. It is therefore vital that the old fiscal framework is not reapplied before new economic governance and flexible principles to coordinate fiscal policies within the Union are agreed. Rejuvenating and re-establishing fiscal policy as the primary tool of macroeconomic management deserves an open and public debate.
Fiscal policy should be an enabler, not the chain that holds economies back. Our fiscal framework needs to be aligned, not at odds, with stated goals of full employment and environmental protection laid out in the Treaty of the European Union. Whilst welcome, an enhanced EU level budget alone will not be enough to meet these goals, national fiscal policy must be empowered too. Indeed, as we continue to face growing uncertainties, arbitrary numerical fiscal rules are simply not fit for purpose.
Tinkering around the edges with incremental changes will fall wide of the mark. The European Commission needs to seize the current narrow window of opportunity to spearhead a significant paradigm and narrative shift. It is all the more urgent to turn fiscal policy from an end to a means, and think more functionally about what the wider economy, society and the planet we inhabit really need. Getting policy right in this area is one of the single most important priorities for recovering from Europe’s greatest peacetime recession and addressing social and ecological challenges.
We realise that the reform will not be simple and completed over night. We ask you to use the following principles as a bedrock when rethinking the current fiscal framework. We believe that if these principles are not met – you are going to fail the people and future generations of Europe.
- Member States are fiscally enabled and incentivized to flexibly reach the goals of full employment with decent jobs and a socially just green transition, making sure no one is left behind.
- A sizable and permanent community EU budget and borrowing capacity is established for promoting investment supportive of the Green Deal and a socially just transition.
- 3. A coordinated interaction of fiscal and monetary policy is made possible: governments take a primary role in macro stabilization. The ECB pursues an accommodative stance that supports democratically decided fiscal objectives, allowing member states to take full advantage of the fiscal potential afforded to them by monetary policy.
Of course, looking only at the sheer quantity of borrowing is not sufficient. Public spending and revenues cannot simply be aimed at providing measures to boost GDP growth with no consideration of the impact on future public prosperity or resilience. Economic and fiscal policy need to be primarily guided through a lens of broader public good and wellbeing, reducing inequality and meeting ecological commitments.
Far from making fiscal policy more responsible, the current fiscal framework is the exemplar of irresponsibility – the EU’s consistent failure to meet its own goals on environmental protection and full employment are indicative of this. The price of inaction will prove far more costly to governments and society in the long run. We have high hopes and we are looking forward to an open-minded debate
without prejudice. No stone should be left unturned. You can count on our support in delivering this transformative agenda, and we look forward to your next steps.
Signatories
NGOs, think-tanks and foundations:
Miatta Fahnbulleh, Chief Executive, New Economics Foundation
Benoit Lallemand, Secretary General, Finance Watch
Silja Markkula, President, European Youth Forum
Jeremy Wates, Secretary General, European Environmental Bureau
Nicolas Hulot, former French Minister for green and social transition, Honorary President, Fondation pour la nature et l’ homme
Jorgo Riss, Greenpeace Europe
Nick Bryer, 350.org
Wendel Trio, Director, Climate Action Network (CAN) Europe
Michael Vincent, President, Greentervention
Barbara Unmüßig, President, Heinrich-Böll-Stiftung, Germany
George Soros, Chair, Open Society Foundations
Robert Johnson, President, Institute for New Economic Thinking
Jakob Hafele, ZOE-Institute for Future-fit Economies
Malcolm Williams, Zero Waste International Alliance
Alain Grandjean, President, Fondation Nicolas Hulot pour la nature et l’ homme
Andras Lukács, Clean Air Action Group
Wojtek Kalinowski, Co-director, Veblen Institute for Economic Reforms
Domantas Tracevičius, Founder, VšĮ “Žiedinė ekonomika”
Dr. Umed Temursho, IOpedia, Spain
Arnaud Schwartz, President, France Nature Environnement
Jeremie Fosse, President, eco-union, Spain
Francisco Ferreira, President, ZERO – Association for the Sustainability of the Earth System (Portugal)
Stanislas Jourdan, Executive Director, Positive Money Europe
Miljenka Kuhar (Director) – Society for Sustainable Development Design – DOOR
David Boyle, Co-director, New Weather CIC
Fernando Ferrando (President) – Fundación Renovables, Spain
Michal Len, Director, RREUSE
Paula Nunes da Silva, President, Quercus ANCN
Fran Boait, Positive Money UK
Laurent Morel, Président de l’Institut Français pour la Performance du Bâtiment
Jordi Ibáñez, Director, Fundación Finanzas Éticas, Spain
Ákos Éger, executive president, National Society of Conservationists – Friends of the Earth Hungary
Konsta Nylander, Chairman, Talousdemokratia – Economic Democracy Finland
Nicolas Dufrêne, director, Institut Rousseau
Shahin Vallee, German Council on Foreign Relations, Head of the Geo-Economics Programme
Leyla Larbi, SumOfUs
Mathis Richtmann, Dezernat Zukunft
Dr. Christoph Gran, ZOE-Institute for Future-fit Economies
Jean-Marc Jancovici, President, The Shift Project
Les Économistes atterrés, France
Morgane Créach, Directrice du Réseau Action Climat, France
Trade Unions:
Luca Visentini, General Secretary, ETUC
Laurent Berger, ETUC President and General Secretary, CFDT, France
Reiner Hoffmann, President of the German Confederation of Trade Unions (DGB-Germany)
Wolfgang Katzian, President of Austrian Trade Union Confederation (ÖGB)
Unai Sordo, General Secretary of the CCOO, Spain
Pepe Alvárez, General Secretary Unión General de Trabajadores de España (UGT-Spain)
Joaquín Pérez da Silva, General Secretary Unión Sindical Obrera (USO-Spain)
Miranda Ulens, General Secretary of the General Labour Federation of Belgium (FGTB-ABVV)
Marie-Hélène Ska, General Secretary, Confédération des Syndicats Chrétiens (CSC-Belgium)
Annamaria Furlan, General Secretary, CISL-Italy
Sylvain Hoffmann, Director, Chambre des salariés Luxembourg
Jarkko Eloranta, President, Central Organisation of Finnish Trade Unions (SAK)
Yannis Panagopoulos, GSEE President, Greece
Plamen Dimitrov, President, CITUB
Inga Ruginiene, President, Lithuanian Trade Union Confederation (LPSK)
Melinda Doszpolyné Mészáros, President, LIGA-Hungary
Imre Palkovics, President, MOSZ-Hungary
László Kordás, President, MASZSZ-Hungary
Csaba Csóti, President of the Forum for the Co-operation of Trade Unions (SZEF) Hungary
Jan Willem Goudriaan, General Secretary of the European Federation of Public Service Trade Unions (EPSU)
Larry Flanagan, President, European Trade Union Committee for Education (ETUCE)
Agostino Siciliano, General Secretary, FERPA (European Federation of Retired and Elderly People)
Ricardo Gutiérrez, General Secretary, European Federation of Journalists (EFJ)
Yvan Ricordeau, National Secretary in charge of European and international affairs, CFDT, France
Oliver Röpke, President of the EESC Workers’ Group
Javier Doz, President of the EESC’ European Semester Group
Luc Mathieu, General Secretary, CFDT Bank and Insurance, France
Nora Back, OGBL Luxemburg
Pierpaolo Bombardieri, General Secretary, Italian Union of Labor (UIL)
Academics and researchers:
Olivier De Schutter, UCLouvain and UN Special Rapporteur on extreme poverty and human rights
Dr. Philipp Heimberger, Vienna Institute for International Economic Studies
Dr Lars Ahnland, Stockholm University, Sweden
Sergio Rossi, Full Professor of Economics, University of Fribourg, Switzerland
Prof Tim Jackson, University of Surrey
Dr. Dirk Ehnts, Pufendorf-Gesellschaft e. V.
Laurence Scialom, Professor University Paris Nanterre
Benjamin Braun, Max Planck Institute for the Study of Societies
Simon Wren-Lewis, Emeritus Professor of Economics, Oxford University.
James K. Galbraith, The University of Texas at Austin
Professor Stephany Griffith-Jones,IDS, Sussex University and IPD, Columbia University
Professor Steve Keen, Institute for Strategy, Resilience and Security, University College London, UK
Saskia Sassen, Professor, Columbia University, New York
Malcolm Sawyer, Emeritus Professor of Economics, University of Leeds, UK
Richard Murphy, Tax Research LLP and Visiting Professor of Accounting, University of Sheffield
Gary Dymski, University of Leeds
Rens van Tilburg, Sustainable Finance Lab at Utrecht University
Asker Voldsgaard, University College London
Dr Neil Lancastle, De Montfort University, Leicester, UK
Dominik Leusder, London School of Economics
Professor Nigel Dodd, London School of Economics
Dr Lorena Lombardozzi, The Open University UK
Dr Daniela Tavasci, Queen Mary University of London, UK
Professor Felix FitzRoy, University of St. Andrews
Nicholas Haagensen, Postdoc at iCourts, University of Copenhagen
Jens van ‘t Klooster, KU Leuven
Dr Jorge Garcia-Arias, University of Leon, Spain
Dr Nina Eichacker, University of Rhode Island, Kingston, RI USA
Dr. Thomas Marois, UCL Institute for Innovation and Public Purpose
Dr. Phil Armstrong, Gower Initiative for Modern Money Studies
Professor Emeritus Machiko Nissanke, SOAS, University of London
Professor Emeritus François Morin, University of Toulouse
José Bruno Fevereiro. The Open University and Goldsmiths College, UK
Dr. Daniele Tori, The Open University Business School, UK
Andrew Sayer, Emeritus Professor, Lancaster University, UK
Dr Adam Barrett, University of Sussex, UK
Marco Missaglia, Professor of Economics, University of Pavia
Dr Jim Jin, University of St Andrews
Sergio Cesaratto, Full professor, University of Siena (Italy)
Thibault Laurentjoye, Robert de Sorbon Foundation, Paris.
Dr Adrian Bua, De Montfort University
Dr Andy Denis, City, University of London
Josh Ryan-Collins, UCL Institute for Innovation and Public Purpose
John T. Harvey, Professor and Chair of Economics, Texas Christian University
Dr Elisa Van Waeyenberge, co-Head of Economics Department, SOAS University of London
José Pérez-Montiel, University of the Balearic Islands
Prof. Leonard Seabrooke, Copenhagen Business School
Duncan Wigan, Professor MSO Copenhagen Business School
Dr Muhammad Ali Nasir, University of Huddersfield
Prof Joscha Wullweber, Witten/Herdecke University
Simon Schairer, ICDD, University of Kassel
Nikolaos Filippakis, Hellenic Mediterranean University
Professor Mehmet Asutay, Durham University Business School
Dr. Matthias Kroll, World Future Council
Prof. Rosaria Rita Canale, University of Naples “Parthenope”
Prof. Gennaro Zezza, University of Cassino
Thorvald Grung Moe, Levy Economics Institute
Prof. Antonella Stirati, Università Roma Tre
Ryan Bellinson, UCL Institute for Innovation and Public Purpose
Prof. Dirk Bezemer, Groningen University
Prof. Nicola Acocella, Sapienza University of Rome
Dr. Andrew M. Fischer, Erasmus University Rotterdam
Etienne Lebeau, Centrale nationale des employés (Belgium)
Dr. Moutaz Altaghlibi, Sustainable Finance Lab, Utrecht University.
Professor Emeritus Hans Schenk, Dept. Economics, Utrecht University
Prof. Irene van Staveren, Erasmus University Rotterdam
Dr. Thiemo Fetzer, University of Warwick
Dr. Matthieu Méaulle, Membre Associé PHARE/CNRS, University Paris 1 Panthéon-Sorbonne
Prof. Jesus Ferreiro, University of the Basque Country UPV/EHU
Prof. Em. Joseph Huber, Martin Luther University Halle, Monetative Berlin
Dr Andrew Jackson, University of Surrey
Andreas Maschke, University of Leeds
Dr Paul Segal, King’s College London
Dr. Michael Paetz, Hamburg University
Dr Graeme Smith, The Open University, UK.
Prof. Roberto Veneziani, Queen Mary University of London
Dr. Janis Brizga, University of Latvia
Jim Richard Surie, MSc, Sustainable Finance Lab
Dr Max Krahé, University of Duisburg-Essen
Professor Martyn Barrett, University of Surrey, UK
Mogens Ove Madsen, Aalborg University
Prof. em. Jesper Jespersen, Roskilde University, Denmark
Dr Jonathan Perraton, University of Sheffield, UK
Dr Maria Nikolaidi, University of Greenwich, UK
Dr Yannis Dafermos, SOAS University of London, UK
Inge Røpke, Professor, Aalborg University, Denmark
Dr. Herman Wijffels, emeritus professor Utrecht University
Plamen Ivanov, University of Winchester
Prof Dr Johannes Schmidt, Karlsruhe University of Applied Sciences
Michael Jacobs, Professorial Fellow, Sheffield Political Economy Research Institute, University of Sheffield, UK
Michel Dévoluy, Professeur honoraire, Université de Strasbourg
Alexandre Rambaud, AgroParisTech-CIRED / Université Paris-Dauphine
Jean-Michel Servet, professeur honoraire IHEID Genève, Université Lumière Lyon 2
Thomas Lagoarde-Segot, KEDGE BS, SDSN France
Ivar Ekeland, Université Paris-Dauphine
Prof Christophe Revelli, KEDGE BS
Roland Pérez, professeur émérite, Université Montpellier, France
Jérôme Trotignon, Université de Lyon, France
Henri Sterdyniak, Sciences Po, Paris.
Eve Chiapello, EHESS, Paris
Jean-François Ponsot, Pacte-CNRS Univ. Grenoble Alpes
Luis Reyes, Kedge BS
Claude Simon, Professeur émérite, ESCP Business school.
Prof Michael Roos, Ruhr-Universität Bochum, Germany
Dr Hugues Chenet, UCL Institute for Sustainable Resources (UK), Chaire Energie et Prospérité (FR)
Jean-Marie Harribey, économiste, Université de Bordeaux Anne Eydoux, Cnam, Paris
Dr. Virgile Perret, Geneva
Ivar Ekeland, Université Paris-Dauphine
