Green Golden Rule

In an unexpected turn of events – the sort that makes politics so fascinating, precisely because it is so chaotic – the European Commission has proposed a « green golden rule ». This rule means that public investment in the energy transition, namely all investment that will make us less dependent on external energy suppliers and all investment that will enhance the resilience of our energy systems, may, up to a certain extent, be excluded from the public deficit ratio.

As you know, the deficit of a eurozone Member State cannot exceed 3% of GDP. However, since it has become necessary to increase military spending, and the US President is demanding that all NATO members spend the equivalent of 5% of their GDP per year on defence, this rule has been undermined.

A small loophole…

The Commission subsequently authorised a “national defence spending exemption clause”, which enables eurozone Member States to exceed the 3 per cent deficit threshold by up to an additional 1.5 percentage points of GDP. It is highly technical, but in short, it amounts to not treating all public expenditure in the same way – a principle we have been advocating for years!!! Investing in local energy generation is not the same thing as funding day-to-day expenditure, and above all, investment in the energy transition must happen now and is not a linear process. The rule of always maintaining the same authorised annual deficit is rather shaky from an economic theory standpoint. It is more like a long-term goal, and applying it regardless of the circumstances can make us considerably more vulnerable.

The European Commission, in its “Spring Package” publication, which reviews all the economic reforms implemented in each country, proposed a new degree of flexibility on 3 June: within that additional 1.5 per cent, up to 0.3 per cent of GDP can be allocated to investment in the energy sector! Excluding energy transition investment from traditional accounting rules is something local authorities have been calling for in recent years! This is therefore very good news, and it is now up to local authority associations to request talks with their respective budget ministries to propose investment projects that could fall under this “national exemption clause”.

But where did this proposal come from? Who twisted the arm of the all-powerful Directorate-General for Economic Affairs? The Italian Government. Energy prices threaten to strangle the European economy, but this is even more pronounced in Italy, given how heavily its energy mix relies on gas. The fact that Europe has been singled out to explain why Italians are struggling with their purchasing power has borne fruit, more so than any other rational and justified argument. This might be infuriating for those who campaign for this cause on a daily basis, but for a political solution to emerge, it first needs to be tucked away in a drawer somewhere. After all, the political agenda is rarely logical, rational or relevant… and that is precisely what makes politics so appealing!