Minerva Lab

Reconciling fiscal and environmental sustainability in the Eurozone
di Paul van den Noord

Fiscal restraint looks inevitable in the Eurozone following the pandemic, especially if the fiscal rules are reinstated. How to match this with the need to finance the climate transition? Two possible routes are explored. One is the adoption of a ‘green golden rule’, with the structural deficit limit (or ‘Medium Term Objective’) increased by 1% of GDP. Alternatively, new borrowing capacity could be created at the centre through a ‘European Climate Fund’, involving some redistribution towards countries most in need of abatement. Either way, financing the energy transition – now more urgent than ever in view of the Ukrainian war – could be achieved within the confines of the 60% of GDP debt constraint.

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Reconciling fiscal and environmental sustainability in the Eurozone

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