Debt rules will affect the most vulnerable, EU trade union chief warns

The new EU rules for national debts and deficits will limit member states’ ability to act on climate change in a socially fair manner, the secretary general of the European Trade Union Confederation (ETUC), Esther Lynch, told Euractiv in an interview, warning against a return of austerity across the bloc.

The ongoing economic governance review, which looks to keep EU member states’ deficit and debt levels in check, has been the source of intense negotiations in recent months, in the hope that ministers agree on a new set of rules by year-end.

The previous rules in place, whose application was suspended in 2020 to account for the COVID crisis, were found to reinforce and encourage austerity politics:  The constraints for member states to reduce debt and deficit were such that it would ultimately backfire, with high social and economic costs.

In April, the Commission officially proposed a new framework, with tailored four-year-long debt reduction plans for each country, and looked to give member states more leeway when looking to invest in the twin green and digital transition.

“Do the sums”

In practice, however, the review is no panacea, Lynch told Euractiv. “We’ve asked member states to do the sums,” she said.

“We’re worried member states are sleepwalking into this decision [to review debt rules].”

According to Lynch, whose main role is to speak on behalf of 93 trade union organisations from across the bloc, member states have not quite worked out “what in practice [these new rules] will mean in one year, two years, three years […] and what austerity measures some of them will have to put in place”.

Her concerns centre around a set of ‘common benchmarks’, added into the Commission’s proposal after a last-minute push by Germany, which would apply uniform rules to all debt reduction plans, irrespective of country-specific needs.

This, many experts have argued, gravely limits the true impact of the reform, and curtails long-term investments in the green transition.

In a communiqué released last April, ETUC called for a “golden rule on public investments,” as EU countries look for new ways to finance green investments and achieve the EU’s 55% greenhouse gas emissions reduction plans by 2030.

“It should be like in a company,” Lynch said, where “you would be able to depreciate the investment over a long period of time”.

Instead, as things stand in European Council negotiations, green and digital investments would not be explicitly mentioned in the rules – unlike defence investments, as Euractiv recently revealed – but could be taken into account when the European Commission considers expanding debt reduction trajectories from four to seven years.

Not good enough in Lynch’s eyes: “What we are absolutely asking for is for fiscal scope, managing the green transition, and social expenditures”. The current state of things is such that there are “no safeguards that it will not affect the most vulnerable,” she claimed.

“We go to meetings where we are told ‘nobody will be left behind’. We’re told there is a European pillar of social rights, there’s a Social Europe. But as we’re having these conversations, at the very same time, [debt rules negotiations] will be introducing a set of rules which will make everything else impossible”.

“Out of the public domain”

In her view, it is high time the conversation opened to a general public debate, so citizens across the EU understand what these new rules mean for them.

“The discussion has been hijacked by technical specialists, by technocrats,” Lynch said. “We would have expected governments to […] work out exactly what costs would need to be made”.

Will taxes go up? Will austerity measures be implemented? Citizens are not in the know because the conversation has been moved “out of the public domain”.

Yet “the consequence of the outcome of that discussion has very real implications for political decisions, and it will narrow the margin for political decisions to be made at the national level,” Lynch warned.

In ETUC’s view, there is still time for member states to go back to the drawing boards, and make the whole thinking over new debt rules more democratic.

In this vein, she refuted the argument that an agreement must absolutely be found before the end of the year, or else old rules would start applying again.

“The current suspension [of the debt rules] would remain in place for another couple of months so as to give time rather than just create an unnecessary deadline”.

Ultimately, she had one clear message for all member states: “Don’t make the mistake of sleepwalking into a set of rules before you’ve done the sums and figured out what the consequences are”.

[Edited by Jonathan Packroff / Zoran Radosavljevic]