Under the EU’s plans for new fiscal rules, only three member states (Denmark, Sweden and Ireland) could afford to meet their green and social investment gaps in 2027, according to a an analysis published by the European Trade Union Confederation (ETUC).
The European Commission proposed the new rules in April 2023 and a political agreement was reached in February 2024, with the aim of restricting public spending to ensure debt sustainability, with EU governments required to keep their budget deficits below three percent of GDP and their public debt below 60 percent of GDP, while protecting investments in strategic areas.
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“The proposed rules will put a straitjacket on member states and stop them from making even the minimum investment needed to reach the EU’s own social and climate goals,” said ETUC general secretary Esther Lynch, commenting on the report.
The ETUC report estimates that an additional €300-420bn a year (2.1-2.9 percent of EU GDP) would be needed to meet the needs of member states — and EU Commission figures show that investment in Europe’s social infrastructure is already €192bn a year below what is required.
“The EU’s own polling consistently shows that these are the priorities of European citizens and acting in complete contradiction to them just months before elections is a recipe for disaster,” said Lynch.
The European Parliament is expected to hold a final vote on the new fiscal rules during the last plenary session of this mandate, on 22-24 April in Strasbourg, and workers’ representatives are urging MEPs not to give them the green light.
“These limits on member states must not be approved,” Lynch warned.
If adopted, the new rules would mean budget cuts of over €100bn for EU capitals in the first year of implementation of the new fiscal rules alone, the ETUC noted.
Looking more closely at the impact of the planned economic governance rules, two-thirds of EU member states would be unable to meet their objectives for investment in schools, hospitals and housing, at a time when these three areas are under increasing pressure.
European trade unions describe the political compromise reached as a step back from the original proposal, which allowed more discretion and did not include as many numerical benchmarks.
Against a backdrop of growing social inequalities, accelerating climate change, geopolitical tensions and an ageing population, the proposed EU fiscal rules fail to prioritise pressing social, climate, employment and demographic challenges, the report argues.
New progressive taxation and a long-term EU investment fund could help bridge countries’ social and green investment gaps, along with more flexible fiscal rules, the analysis recommends.
“This research further shows there is a clear responsibility on the EU to put in place a permanent investment mechanism at EU level with the capacity to deliver on its social and green objectives,” said Lynch.
Even if the EU’s Recovery and Resilience Fund (RRF) were extended, the researchers calculated only five countries would be able to both meet their social and green investment targets in 2027.
