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Flexible fiscal rules should remain in place until EU economic governance is reformed, local leaders ask  

​Less bureaucracy, a "golden rule" on cohesion co-financing and fair taxation are the ingredients EU needs for a sustainable recovery.

The European Committee of the Regions (CoR) has underlined the major flaws of the current European economic governance and said that it is imperative to avoid new austerity policies in the aftermath of the COVID-19 crisis and the war in Ukraine. In recommendations adopted at the plenary session, local and regional leaders called for the establishment of a "golden co-financing rule" for structural funds and welcomed the steps made so far towards a fairer tax system, including a proposal for a global minimum level of taxation for multinational groups in the Union.  They expressed concern, however, that the new rules could increase red tape for businesses.

The EU has arrived at a critical moment, and needs to find ways and means to ensure cohesion and the prosperity of European citizens, the CoR underlined in the opinion on the European economic governance review adopted at the plenary meeting held on 27-28 April. The opinion, which was drafted by Elio Di Rupo (BE/PES), Minister President of Wallonia and former Prime Minister of Belgium, highlights the effects that the economic governance framework has had on local and regional governments, which are responsible for almost a third of public spending and more than half of public investment in the EU as a whole.

"European economic governance must be fundamentally reviewed and adapted to the new realities of our territories and regions. The war in Ukraine, the COVID-19 crisis and the digital and climate transitions all need public investment. This is why we call for an extension of the general escape clause, excluding key investments from the co-financing rule, and involving cities and regions in the European Semester. We need a new mechanism to make public debt sustainable and avoid the return to austerity," stated the rapporteur, Mr Di Rupo.

The CoR reiterates that the Stability and Growth Pact (SGP) and other aspects of the current EU economic governance framework have several major flaws, including a lack of transparency and democratic legitimacy, and that these should be tackled in reforms envisaged by the European Commission.

Local leaders reiterated the request for a "golden co-financing rule" that would exempt co-financing of the Structural and Investment Funds by the Members States and regions from the debt and deficit rules of the SGP. They also asked for the establishment of a permanent European unemployment reinsurance scheme, drawing inspiration from the success of the SURE instrument, which helped to save jobs during the COVID-19 pandemic.

Moreover, the CoR underlined the importance of applying the "do no harm to cohesio​n" principle – which is included in the Commission's Communication on the 8th Cohesion Report – in order to ensure complementarity and synergies between cohesion policy and other EU policies, thus avoiding both hampering the process of convergence and an increase in regional disparities.

The need for a fair taxation in Europe and the fight against tax fraud were underlined by the Di Rupo's opinion, and they were the main focus of a separate opinion adopted at the Plenary on 27-28 April. The opinion, drafted by Federico Borgna (IT/PES), Mayor and President of the Province of Cuneo, focused on the proposal for a Council Directive on ensuring a global minimum level of taxation for multinational groups, which seeks to implement in the EU legal framework the global agreement reached by the OECD in October 2021

The rapporteur said: "Introducing a minimum level of taxation for multinationals within the EU is a fundamental step in European integration. It is essential to guarantee sustainable development, with the utmost attention to incentives and investments for the ecological transition, research and innovation, in order to positively affect the real economy by creating jobs through the construction of a regulatory and fiscal system capable of putting companies in the best conditions to compete on the global market."

Background:

In October 2020, the CoR adopted a first opinion on the Economic Governance Review drafted by Elio di Rupo, which already called not to end the application of the general escape clause of the Stability and Growth Pact – activated in March 2020 for the first time in the history of the euro area – and the temporary state aid framework at EU until the economic situation in Europe has stabilised.

The European Commission relaunched the public debate on the review of the EU’s economic governance framework with a Communication published on 19 October 2021. The debate was first launched in February 2020 but later suspended due to the COVID-19 pandemic. On 28 March 2022, the EU Commission published a report summarising the results of the online public survey on the future of the EU's economic governance framework. Replies indicates that many respondents are of the view that that fiscal policy should become more growth-friendly, mindful of social issues, and support the policy priorities for the twin green and digital transition.

In December 2021, the European Commission has proposed a Directive to ensure a global minimum effective tax rate of 15% for large groups operating in the EU. The proposal delivers on the EU's pledge to move extremely swiftly and be among the first to implement the historic global tax reform agreement reached two months earlier by 137 countries and jurisdictions. However, finance ministers of the EU have not reached a unanimous agreement so far on the EU Directive.

More information on the CoR's work on cohesion policy and economic recovery can be found on the COTER commission webpage and on the CoR webpage "Cohesion, our fundamental value"

Contact:

Matteo Miglietta

Tel. +32 (0)470 895 382

matteo.miglietta@cor.europa.eu




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