The introduction of a European golden rule could apply to the Italian GDP an additional growth of between 3,8 and 5,4% by 2030. This was stated by Lilia Cavallari, president of the Parliamentary Budget Office, during a hearing in the Budget Committee of the Chamber on the communication from the European Commission entitled "The EU economy after COVID-19: implications for economic governance".
What is the golden rule
By golden rule we mean the possibility of resorting to a greater public debt to finance expenditure with long-term repercussions (such as climate transition and digital transformation) or European public goods (research and innovation, defence, security, energy independence, financial stability). This would essentially be a derogation from the European rules on deficits and public debt.
Why is it needed
The golden rule is one of the main innovations that could be introduced with the reform of the Stability and Growth Pact. At the moment, in fact, the European budget rules are suspended to deal with the pandemic, but it is widely believed that, if they were to come back into force without corrections, they would impose heavy austerity maneuvers which would not only block the recovery, but would also risk pushing Europe back into recession.
The simulations of the UPB on the golden rule
The Parliamentary Budget Office has formulated two hypotheses for investments associated with the golden rule: in the first case, the derogation would concern all public investments; in the second case, however, the greater debt would be granted only for investments with a greater impact in terms of multiplier, such as, for example, public investment in renewable energy.
According to the Upb, both hypotheses would produce significant benefits in terms of growth. In the first scenario, in fact, real GDP would be in 2030 higher than 3,8% compared to the baseline scenario; in the second case, however, the real GDP would be higher than 5,4%.
Furthermore, the impact would also be favorable on the debt reduction in relation to GDP. “A well thought-out golden rule – comments the Upb – could better combine a path of debt consolidation with growth”.
