Debate: Review of the macroeconomic legislative framework
Date: WEDNESDAY, 7 JULY 2021
Speaker: Virginijus Sinkevičius
Language: EN

We welcome the large support that this report has received in the Committee on Economic and Monetary Affairs (ECON). This shows the cross-party support that exists on the importance of reviewing the economic governance framework, not least our common fiscal rules. It is also comforting that you succeeded to achieve broad convergence on this complex issue. The ECON Committee has produced a very rich report, and in the interest of time I will limit myself to a few key remarks.  First, I am glad to note that the Commission and the ECON Committee entirely agree on the near-term priorities for fiscal policy, namely to continue an expansionary fiscal stance for as long as is needed to support the recovery as well as the necessary transition of our economies, followed by a reorientation of fiscal policies aimed at fiscal sustainability in the medium term. This is entirely in line with the recent guidance that we provided to Member States on 2 June.  Second, on the fiscal rules, the report correctly highlights the sharp increase in public debt in the EU since the start of the pandemic and the need to ensure country-specific pace of debt reduction that safeguards both fiscal sustainability and sustainable inclusive growth. We are not there yet, but once the health situation is fully under control and the economic recovery has taken hold, Member States will indeed need to achieve a gradual and credible reduction of high public debt pressures, creating buffers for future needs and challenges. However, and turning to my third point, when the time comes for this gradual fiscal consolidation, we will need to avoid a mistake from the last crisis, which was to allow the burden of fiscal consolidation to fall on public investment. The Recovery and Resilience Facility (RRF) will play a key role in this regard but Member States must also seek to protect nationally financed public investment without jeopardising debt sustainability. The fiscal guidance that we recently provided to Member States contains elements that go in this direction. The report rightly stresses that further efforts are needed to improve the quality of public finances so as to improve the country’s long-term debt sustainability and enhance the long-term growth potential. It is highly relevant to reflect how the EU’s economic governance framework could contribute to that.  Let me turn to the macroeconomic imbalance procedure (MIP), which is another major element of our economic governance framework. The MIP widened the scope of our surveillance beyond fiscal policies to cover other potential sources of macroeconomic imbalances such as large current account imbalances, deteriorating competitiveness, high private debt housing bubbles or fragile banking sectors. The COVID-19 crisis has made some of those aspects even more relevant. There are indeed some challenges around MIP implementation, on which we are collecting views. For instance, as highlighted also in our review, the policy traction of the MIP has declined over time and some imbalances are only gradually being reduced.  The report rightfully puts a specific emphasis on the euro area dimension. In recent years the Commission already paid more attention to this such that all countries contribute to the rebalancing and their efforts are mutually reinforcing for the benefit of the area as a whole. In addition, the COVID—19 crisis has called for a stronger forward-looking perspective in our MIP surveillance, which we have pursued for this past year given the very unusual economic circumstances and exceptional uncertainty. To conclude, let me once again thank honourable Member Marques for this excellent and thought-provoking report. I look forward to hearing your views.