The European Union is currently struggling to reform its debt rules. The European Commission wants to ensure that EU countries can individually negotiate their debt reduction trajectory – rather than having to adhere to rigid rules. But according to an analysis by the British think tank New Economics Foundation, even the looser paths promised to reduce debt could hinder the achievement of climate goals.
The rules proposed so far would deter countries from making green investments that create more value in the long run, the study authors wrote. An analysis by the International Monetary Fund (IMF) shows that green investments have an above-average positive effect on economic growth compared to other public investments. Building on this, the analysis concludes “that countries’ debt ratios fall even if they make green investments while running a deficit”.
Reducing spending to mitigate climate change now means governments will have to spend more money on adapting to climate change impacts in the future, the authors say. NEF expert Sebastian Mang said deadly heatwaves, devastating wildfires and catastrophic flooding this summer have once again made the severity of the climate crisis visible to all.
“EU misjudges the big picture”
“The EU misjudges the big picture by focusing on arbitrary debt reduction targets that limit green spending rather than boosting green investment.” Europe urgently needs this to transform its economy and invest in climate-friendly public services. According to the calculations, even the most indebted countries in the EU could spend at least €135 billion a year on green investments by the 2030s and still reduce their debt burden.
Due to the Corona crisis and the consequences of the Russian attack on Ukraine, the rules that were in force until 2024 were suspended. But from next year, discipline in the EU budget will again prevail – albeit in a different way than before and, if Brussels has its way, a little less strict. However, countries such as Austria and Germany want to prevent this. Austrian Finance Minister Magnus Brunner stated on the sidelines of a meeting with EU colleagues in June that the only way to ensure that “debt goes down” is tougher rules.
Source: Krone
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