Once the pandemic is over and the main economic consequences of the war in Ukraine have been overcome, the Ministers of Economy and Finance of the European Union must close an agreement on the new fiscal rules that will apply from 2024. It is one of the points key of the semester chaired by Spain in which the representatives of Social Security and Inclusion seek to gain a foothold. The group, under the guidance of José Luis Escrivá, tries to achieve some flexibility in compliance with fiscal rules for part of the social spending, which they qualify as social investment due to their returns for the economy as a whole.
“Spain, together with Belgium, has promoted this informal working group and in both cases conversations are held with those responsible for the economy. It is a joint effort and they will be the ones who will agree on the margin for social investment on the path of fiscal adjustment “, explains the general secretary of Objectives and Policies of Inclusion and Social Security, Milagros Panigua, to La Información. The initiative has barely taken its first steps and has not been formally raised, however, more than twenty countries have already joined and it is expected that this weekend it will be presented to the economic representatives at the informal meeting in Santiago of Compostela.
Faced with the austerity policy that was imposed in Europe during the last financial crisis and in line with the economic governance rules proposed by the European Commission in April, negotiators from Spain and Belgium seek to protect certain social expenses that have proven to have returns. positive for the economy as a whole. “We try to differentiate spending from social investment based on the scientific evidence that member states will provide and thus ensure that it is taken into account in compliance with the new fiscal rules,” says Panigua, who represents Spain in this forum.
Data draws the line between spending and investment.
The idea is to distance oneself from political discussions that could hinder consensus among the 27, both in the Social Security forum and in the economic forum, along these lines, they argue that not all spending can be classified as an investment – as defended from The most leaning positions to the left-nor the opposite. For the doctor in Economic Sciences and director of International Projects at the Ivie, Matilde Mas, the abundant studies that measure the impact of public policies and carry out a cost-benefit analysis draw a clear border between investment and spending. “Is it contributing to the growth of the economy? This is the only requirement to meet to be classified as an investment.”
“Not all types of social spending can be considered investment, only those that have the capacity to influence growth potential,” he explains in conversation with this medium. “Until now, spending on education or other forms of social spending has been considered as current distributive spending, which in general terms tries to remedy a problem that has occurred from the perspective of social welfare. On the other hand, spending on investment, is made with the objective of obtaining a higher return in the future.” And for the economist, there are certain social policies that fall into this logic and that also not only provide immediate benefits, but also in the long term.
Mas has been in contact with the proposal as part of his work at the Valencian Institute of Economic Research and focuses on the weight that investment in certain social focuses, such as early school leaving, can have on a country’s economy. “If part of the population leaves their studies early, you are reducing your growth potential in the future, but if, on the contrary, you support them and ensure that they train for longer, they will access more productive and better-paid positions with a return . social in the form of taxes, you are making an investment.”
Negotiations will reach 2024
The informal group has met once and is already preparing its next meeting which will take place on September 28. The roadmap provided by the Ministry includes other appointments for October and November, in order to prepare the conclusions that will be presented at the Employment and Social Policy Council (EPSCO). This work will be carried out in parallel with that of the Economy Ministers who must set the lines to reduce the public deficit below 3% of GDP and the debt below 60% in the medium term, as dictated by the EU treaties. Therefore, the Ministry indicates that it is most likely that contacts with the economic owners will be formalized once the Belgian presidency has begun.
The Ministry of Economic Affairs has refused to make any statements in this regard when asked by this newspaper, given the initial nature of the conversations. The holders of the portfolio from Spain and Belgium will be in charge of ‘fighting’ the margin of flexibility for social investment within the framework of the normalization of fiscal policy. At the same time, those responsible for Social Security will focus on specifying public policies that can be considered as such, based on the economic and social returns proven by academic research. However, all of this will take place in the medium term, since the goal is to hold a ‘jumbo’, that is, a joint meeting of EPSCO and ECOFIN in the middle of the first half of 2024.
