COVID-19 has led to more inequality and poverty in Europe. Together with the accelerating climate crisis and ageing population, massive additional investments in education, healthcare and social infrastructure will be needed to maintain Europe's social protection systems, ease the negative impact of the digital and green transitions, and protect the Union's future prosperity. Unfortunately, the EU's current economic governance model does not leave much room for member states to make these kinds of investments in human capital - also called 'social investment'.
This third Policy Brief in a series on reforming EU economic governance sets out five proposals to promote the role of social investment:
- Alter the pace of fiscal consolidation to be in line with economic growth;
- Reassess the accounting procedure for public investments, which can, in the long run, split up government investment from government spending and improve the quality of public finances overall;
- Establish a Future Investment Fund, whereby public investment would be excluded from the calculations of both headline and structural deficits;
- Reform the European Semester in a way that incorporates the lessons of austerity and prioritises social outcomes alongside fiscal and public administration reforms;
- Prioritise what matters to citizens - even if it challenges the existing economic orthodoxy.
This paper draws on the insights of the EPC’s Task Force on Rethinking EU Economic Governance. The contents and views expressed are entirely the work of the authors and should not be interpreted as representing the views of any Task Force member. Papers on the European Semester and the Stability and Growth Pact have already been published. A final overview will follow in early 2022. Read the full paper here.