Take us away from the fiscal edge: Europe needs investment now or will face deindustrialisation [Promoted content]

Europe must avoid a return to austerity, insists Judith Kirton-Darling, Acting Joint General Secretary of industriAll Europe. We need flexible fiscal policies to invest in green, digital, and socially just transitions. This is essential for economic growth and job creation. 

Judith Kirton-Darling is Acting Joint General Secretary of industriAll European Trade Union.

European leaders should learn from the successful post-COVID-19 recovery and build on the solidarity that has been forged. Promoting resilient industries with good industrial jobs and social cohesion should be our collective continental approach for a sustainable future.

As negotiations on the ongoing reform of the EU economic governance rules reach the final stretch, it seems that our political leaders have learnt nothing in the last decade. Ignoring the evidence of the damage done to our industrial fabric and social cohesion in the aftermath of the financial crisis, we are being steered into a new era of austerity and yet another self-inflicted economic crisis in Europe. Industrial workers are rightly asking themselves if a collective insanity has gripped our political leadership? 

At a time when other major economies, most notably the US, are investing in clean tech and good jobs through a more flexible fiscal approach, the EU is about to tie its own hands with new economic governance rules that will prevent almost all Member States from investing in the twin transition and in good quality jobs. 

As the language of industrial policy has re-emerged on the European political scene, the new fiscal rules would make such policies the privilege of those whose national pockets are deepest – fragmenting the internal market and accelerating deindustrialisation in large swathes of Europe. We will all be losers – our industries are entwined. Deindustrialisation in one part of Europe will undermine industrial investments in wealthier regions in the medium term.

According to research from the New Economics Foundation (NEF), only four Member States were able to make the necessary investments to reach the goals of the Paris Agreement and only half able to achieve the European Green Deal when the European Commission first published its proposal on the reform in April this year. Incredibly, this didn’t cause an about-turn by the co-legislators. On the contrary, the reports of the European Parliament and Council common position are about to make matters worse. 

So-called ‘frugal’ and conservative players in the talks are pushing for a common numerical benchmark for debt ratio or deficit ratio reduction. Let’s be clear – such a common numerical benchmark is a return to the old ‘one-size fits all’ approach of the Stability and Growth Pact that lead to the Double-Dip recession and the slow recovery of the European economy after the 2008-09 financial crisis. How quickly we have forgotten the brutal impact that this decision had a decade ago.

A decade on, the ambitious goals that the EU has committed itself to in the European Green Deal, the Digital Decade and the European Pillar of Social Rights are impossible to reach without economic governance rules that would protect (and encourage) green, digital and social investments. 

Our investment gaps are well documented. The Commission has estimated another €520bn public and private investment is needed in the EU per year to deliver the European Green Deal. Leading think-tanks Agora, Bruegel and Bacciati estimate that governments should be investing around 1%–1.9% of their GDP, or €159bn to €323bn a year to achieve the EU’s agreed climate targets, as set out by NEF. 

It is impossible to deliver on the European Green Deal’s promise of a Just Transition for workers and their communities without taking a holistic view on the massive investment needs in decarbonising production and re- and up-skilling workers.

The figures are overwhelming: the European Battery Alliance says that 800,000 workers need re/upskilled to reach the EU’s battery ambitions, while a BCG research for the European Electromobility Platform estimates that 2.4 million automotive workers will need to be retrained by 2030. An estimated total of 25 million manufacturing, mining and energy workers in Europe, our industrial workforce,  will need retraining or upskilling to meet the challenges of the green and digital transitions in the next decade as jobs change, are lost and new ones are hopefully created.

Currently, there are no safeguards foreseen in the fiscal rules to protect these investments, except in the area of defence. There are no proposals for new investment capacities (such as the promised ‘Sovereignty Fund’), only arbitrary cuts through the upcoming economic rules. 

Europe needs to learn from the positive experience of the rapid recovery after the COVID-19 crisis based on investments through the common European Recovery and Resilience Facility. Rather than returning to the failed recipes of the 2010s, politicians should build on the solidarity forged in the pandemic. 

This means looking beyond national borders and seeing our industrial fabric and social cohesion as a collective Continental strength. It means developing a European investment and industrial plan for good industrial jobs. Green, digital and social investments should not be treated as costs, but should instead be deducted from the government net expenditure and be treated in view of their long term contribution to the economy.

The alternative will breed scepticism and resentment as the green, social and digital ambitions of the EU remain statements of intent once again. If the reform of fiscal rules leads to direct budget cuts and prevents most Member States from investing in the twin transition of our economies, voters will punish those wielding the scissors in forthcoming elections.