Climate change results to be added in EU countries proposed fiscal vetting mechanism

A building of the European commission in Brussels, Belgium. EPA-EFE/OLIVIER HOSLET

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The European Commission will this year begin to assess the green transition of EU states as part of its monitoring of national budgets, a top official said, in a new sign of the bloc’s commitment to meet ambitious climate goals.

“For the first time in the commission’s economic monitoring of national budgets we will have a green variable, which is very important,” EU economics commissioner Paolo Gentiloni told reporters.

The EU’s fiscal rules are widely disliked given their impenetrable and convoluted nature — yet it is difficult to avoid setting off political landmines somewhere in the union when any change to them is mooted.

Gentiloni has described the Stability and Growth Pact, which governs the fiscal regime, as out of date and in need of a serious overhaul, given the current low growth and inflation era.

Financial Times reports that on the Italian social democrat’s reform wish list will be changes making the rules more symmetrical — allowing for countries to be pushed to boost their economies via fiscal policy in downturns, rather than just reining in deficits and debt. This, however, would be anathema to fiscally conservative states in northern Europe.

He said European finance ministers would discuss the matter at meetings in Brussels on Monday and expected to continue on Tuesday.

“It’s a change of perspective. When we assess budgets we need to look at expenditures, investments, but also at the results and pace of the green transition,” he added.

It is unclear how this new attention to the fiscal impact of climate policies could change the way Brussels puts pressure on states to correct their fiscal policies. The commission could adopt a more benign approach to countries’ investments in renewable energies or other measures to reduce carbon emissions.

Low-growth, high-debt Italy is asking for that spending to be allowed even when a country’s deficit or debt is already above EU limits.

Reuters / New York Times / Financial Times 

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