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EU should have fiscal stabilisation money after recovery fund ends – Gentiloni

Speaking at a European Central Bank seminar on euro zone fiscal policy, Gentiloni said that apart from such a fiscal stabilisation tool, EU fiscal rules, now under review, also needed a way to encourage public investment and a credible way to reduce public debt without hurting growth.

“Coordinated, countercyclical fiscal policy has proved highly effective in cushioning the impact of the crisis. We need to try to reinforce the ability of national fiscal policy to respond to economic fluctuations,” Gentiloni said.

“It also requires in the longer term a European fiscal stabilisation tool, something that the European Commission has proposed in the past,” he said.

In 2018, the Commission proposed 55 billion euros to be earmarked in the next long-term European Union budget for supporting investment in the euro zone during economic shocks, structural reforms and help join the euro.

The idea never took off because it was replaced by the one-off, 800 billion euro post-pandemic recovery fund (RRF) for all the EU which is to finance the bloc’s transition to a “green” and digital economy.

“For now, the RRF is helpfully also serving a stabilisation role, but stabilisation is not ‘in the DNA’ of the RRF. As you know, it’s an exceptional tool that will run out in 2026,” Gentiloni said.

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