“The budgetary debate should be structured around the comparison between the cost of action and the cost of inaction” | EUROtoday

Lhe present budgetary debate is of an accounting nature: tips on how to enhance revenues and cut back expenditure to scale back deficits and adjust to European budgetary guidelines limiting the approved public deficit to three% of GDP and the state debt to 60%?

These guidelines, which the overwhelming majority of economists agree to acknowledge as meaningless, replicate the circumstances which prevailed on the time of the negotiation of the Maastricht agreements. The image of the general public finance state of affairs of the early Nineteen Nineties has change into a sacred cow, and European regulation has determined that the world will not evolve!

No must remark, besides to notice that public motion is in the present day constrained by a straitjacket that the European Union (EU) imposes on itself, whereas the debt of the United States is rises to 124% of its GDP and that of Japan to 260%. And that would value him dearly…

A budgetary debate must be an train in setting a imaginative and prescient of future public motion to music. It must be dynamic and financial in nature, it ought to bear in mind the evolution of the world and, above all, it must be structured across the comparability between the price of motion and the price of inaction. In a context the place the price of motion to organize for the long run is excessive, it’s important to not contemplate solely this a part of the equation, on the danger of not making the appropriate choices.

Negative influence on GDP

The value of the motion is a right away value. It is estimated by the latest Draghi report at 800 billion euros per yr for the EU, or an quantity equal to five% of its GDP, and at 1,200 billion euros, or 7.5% of GDP, per yr. the Finance Watch report “Europe’s Coming Investment Crisis”. The orders of magnitude are, in any case, comparable, and their significance is commensurate with the upheavals on the earth that should be confronted. The important level is that solely a 3rd of those investments may be financed by personal capital. The remaining two thirds will subsequently need to be financed by public cash and can symbolize an extra annual value of between 3% and 5% of European GDP.

The value of inaction is a deferred value, and it’s far more appreciable: within the absence of important investments, the annual deficit in France’s public accounts shall be not less than 30% of GDP. when Gabriel Attal would be the present age of Michel Barnier…

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