The European Union must invest €5 trillion in its climate plan over the next decade to “retain its credibility as a political project,” according to State Secretary for Economic Recovery, Thomas Dermine.
On the eve of the relaunch of the EU’s economic governance reform, the French-speaking socialist announced his radical proposal, which he said would be needed to meet the Paris agreement targets in an interview with De Tijd.
Dermine explained that, in part, the financing of this plan would rely on European fiscal measures – including a minimum tax on multinationals, financial transactions, digital giants, among others – and on the intervention of central banks, through money creation and the issuing of debt.
As an example of how this would work, he referred to the EU’s major recovery and resilience plan, which is financed by a joint loan on this scale.
He added that, to make this work, green investments should not be included in the calculation of maximum spending under the Stability and Growth Pact (SGP), a set of fiscal rules designed to prevent countries in the EU from spending beyond their means.
According to these rules, which are currently suspended until 2022 due to the pandemic and are being reviewed on an EU-level, national debt cannot surpass 60% of a nation’s GDP, while a state’s budget deficit cannot exceed 3% of its GDP, orders that are difficult to abide by if countries are making significant climate investments.
Dermine said that the solution would be to give green investments immunity of these rules under a system that can distinguish between green and non-green investments when screening national recovery plans, to prevent a further drop in public investment.
“Technically, this is possible as the European Commission has already developed such a tool,” said Dermine.
“We also have informal bilateral contacts with several Member States. None of them have said the idea is stupid, but it’s going to be a political battle, that’s the essence of change,” he added.