[FR] In 2020, Europe is rethinking the figures

This year, a new figure has emerged in Europe: zero carbon. With the exception of Poland, European leaders now unanimously agree on the goal of climate neutrality by 2050.

In 2020, they will debate three other figures. Three round percentages, childishly simple but controversial. First, 1%. This is the threshold of the European Union’s gross national income that high-contributing states refuse to exceed in order to balance the European budgets for the next seven years. The European Parliament, whose approval is essential, aims to commit these funds at 1.3% of GNI. The departure of the British contributor does nothing to help these bitter negotiations, which must be concluded before the end of 2020. Unfortunately, the EU is no stranger to these battles over a paltry 1%, with the slightest upward deviation measuring its ambition.

But another front has opened up, that of 2%. This refers to the eurozone’s inflation level, which is below but close to the level at which the European Central Bank decides to set its interest rates. With inflation having become persistently low in our economies (expected to be 1.1% in 2020 and no more than 1.6% in 2022), the relevance of this target, which has remained unchanged since 2003 and has become unattainable, is being seriously questioned. Christine Lagarde, the new president of the ECB, has announced a ‘strategic review’ that should mobilise her institution next year. Among other things, the idea is to target inflation close to, but not necessarily below, 2% in order to better combat the risk of deflation. This is more than a semantic change; it is a dogmatic revolution.

Another revolution is waiting in the wings. This is the famous 3% of gross domestic product below which a national budget deficit must be maintained. Emmanuel Macron, writing in The Economist, described this Maastricht criterion as ‘a debate from another century’. But the subject will be a recurring theme throughout 2020. The French president believes that this 3% cap stifles public investment, which our continent so badly needs in order to compete globally.

Next year, Europe will therefore be counting to three. Any shift in these red lines will depend largely on Germany in all three cases. As a net contributor to the European budget, Germany is among those attached to the 1% rule. Revising the 2% target, in other words the core of the ECB’s mandate, will also require its approval. And relativising the 3% rule is another way of encouraging Berlin to deflate its budget surpluses in order to boost growth in Europe.

But lifting the taboo on these totemic figures is not just about pushing states to spend more. It also means looking at how they are calculated. The President of the European Parliament, David Sassoli, made this clear at the Jacques Delors Institute in Paris when discussing the European budget: ‘Parliament is not asking for an increase in Member States’ contributions. We want more own resources’ for the EU. Such resources, independent of Member States’ contributions, are a guarantee of European integration.

As for inflation, it is also the way in which its level is calculated that is being targeted. In particular, so that property prices are better taken into account. But also the price of carbon, which is set to rise.

Finally, with regard to the 3% criterion, one idea that is emerging is to exclude “green” investments, i.e. those made to reduce the carbon footprint of our economies, from the calculation of the budget deficit. However, as with education and defence, it is never easy to separate these expenditures from the rest.

Beyond these shifts, it is nothing less than our entire growth model that is being called into question. The zero-carbon target goes hand in hand with ‘economic growth decoupled from resource use’, as stated in the future European Green Deal. This will require a review of the calculation of GDP, the mother of all indices, to include the negative externalities of our production methods and indicators of well-being. Building this sustainable and inclusive growth and giving ourselves the means to quantify progress in a different way must become the number one European priority in 2020 and for the next decade.