Portugal could allocate $3.5 billion for “green” goals and debt reduction

aThese conclusions are from the New Economics Foundation, a social justice-focused research charity, which concluded in a study released today and submitted to Lusa Agency that Portugal “could spend, on average, €3.5 billion annually on ‘green’ investments”. By 2038, reduce debt by 17 percentage points in adverse economic conditions and up to 21 percentage points in positive economic conditions.

To reach these conclusions, this entity considers a more flexible approach to EU fiscals calculated in different scenarios (high or low interest rates, for example), in a “slack” that does not take into account the narrow ceilings of fiscal resources. Deficit and public debt of member states.

Combined, Portugal and other heavily indebted EU countries – such as Spain and Greece – “could spend at least an additional €135 billion annually on green investments, while continuing to reduce their debt burden”. [década de] 2030″, the reflection group underscores the study, stressing that such a commitment is “essential in order for Member States to achieve EU climate goals and implement a socially just transition”.

The stance comes at a time when the European Union is trying to reform its strict community budget rules, which will resume next year after being suspended due to the COVID-19 pandemic and the economic impacts of the war in Ukraine due to the Russian invasion.

The study recommends that the EU reject arbitrary debt and deficit constraints imposed on member states in favor of a more flexible approach, which takes into account the needs and circumstances of each country, and argues that green spending should be excluded from the 3% deficit. “EU limits” on countries, advances the New Economy Foundation.

This is because, according to the think tank, the new EU borrowing rules “prevent member states from making green investments that generate more value than other long-term public investments”.

The New Economy Foundation concludes that the rules proposed by the European Commission “do not take into account the social and environmental costs of spending cuts” and could lead to “a gap between the richest and least indebted countries” and the rest.

This situation arises when, in 2024, European budget rules are expected to resume, with deficit and public debt ceilings, the reform of which is now being negotiated in the EU.

The discussion builds on the European Commission’s proposal, released last April, for risk-based fiscal rules, with a technical path for highly indebted EU countries such as Portugal, giving them more time to reduce deficits and debt.

The Stability and Growth Pact, which came into force 30 years ago, requires member states’ public debt not to exceed 60% of GDP and imposes deficits below the 3% threshold, but in the context of the pandemic, escape is inevitable. This provision was triggered in March 2020 to allow Member States to respond to the COVID-19 crisis by temporarily suspending these requirements.

In the context of geopolitical tensions and market turmoil due to the war in Ukraine, the temporary suspension of SGP rules has been maintained for another year, until the end of 2023.

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