The budget debate must move beyond outdated fiscal constraints and address the cost of action versus inaction on climate change. Investing now in adaptation and mitigation is not just a necessity for the planet but also a financial imperative to avoid economic and social collapse.
The current budget debate is an accounting matter: how can we increase revenue and cut spending to reduce deficits in order to comply with EU budgetary rules that limit public deficit to 3% of GDP and national debt to 60%?
These rules, which the vast majority of economists agree are meaningless, reflect the conditions in place 35 years ago when the Maastricht Treaty was negotiated. This snapshot of the state of public finances in the early 1990s became a sacred cow, and EU law decided that the world would never change again! Public action is now constrained by a self-imposed straitjacket; remember that the debt of the United States amounts to 124% of its GDP and Japan’s to 260%. This is likely to cost the EU dearly.
A budget debate should be focused on implementing a vision of future public action. It should be dynamic and economic in nature, it should take into account how the world is changing and, above all, it should be based on a comparison between the cost of action and the cost of inaction.
While the cost of action to prepare for the future is undeniably high, it is crucial not to consider this alone, as doing so risks leading to poor decision-making....
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