The EU, and the Eurozone in particular, has been going through a period of prolonged economic difficulty. While there are some signs of recovery, growth rates remain too low, only returning to the already modest growth rates of the pre-crisis period. This not only affects the creation of jobs, but also, through lower tax revenues and stagnant GDP levels, the consolidation of public finances. There are clear signs that Europe is not investing enough in its future productive capacity, which will have a significant impact on long-term growth rates in Europe. In this Policy Brief, Fabian Zuleeg and Jan David Schneider argue that the importance of social and other productive public investments should be reflected in Europe’s economic governance framework. This could be accomplished by introducing more flexibility into the system, in the form of a ‘Golden Rule’ – allowing member states to borrow more for investment purposes – alongside a European measurement framework to determine what constitutes investment. In addition, a fiscal capacity is needed, tied to economic reforms through contractual arrangements. According to Zuleeg and Schneider, creating a new space for social investment in the economic governance of the Eurozone might well be a crucial turning point in the political crisis that has followed the economic one.
Read the full paper here