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Philipp Heimberger Profile picture
@heimbergecon
Apr 6 • 5 tweets • 2 min read Twitter logo Read on Twitter
We need to promote public debate on fiscal policy and EU fiscal rules. Yesterday, I did a presentation in Vienna on climate investment in the context of public investment needs and EU fiscal rules reform. I stressed three main points (short thread):

1. If policymakers are serious about meeting the climate goals, they will need to significantly increase public investment for climate and energy. We are talking about *additional* public investment of at least 1% of EU GDP per year. Image
2. The European Commission has published EU fiscal rules reform orientations that were welcomed by EU finance ministers. Tough political negotiations ahead, but what's on the table will not sufficiently increase the scope for public climate investment.

3. Policymakers should introduce an EU investment fund for climate and energy to meet investment needs.

- more realistic to meet climate goals, which may otherwise be missed by a large margin
- easier to enforce reformed fiscal rules more strictly

#FiscalMatters @GeorgFeigl @KatyWieese

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More from @heimbergecon

Philipp Heimberger Profile picture
Mar 22
The European Parliament requested me to write a study assessing the European Commission's orientations on reforming EU fiscal rules, with a focus on Debt Sustainability Analysis as an anchor for bilateral negotiations and surveillance.

Here is a summary of my main results 🧵
The Commission’s (COM) orientations (published in November 2022) were welcomed by the conclusions of the Council of the EU on March 14th 2023. COM proposes an enhanced role for debt sustainability analysis (DSA) in assessing fiscal risks. Focus: bringing down public debt ratios.
Reform orientations:

- COM conducts a DSA for each member state projecting the public-debt-to-GDP ratio over >10 years.
- DSA inputs used to derive reference fiscal adjustment path consistent with falling debt ratio
-Negotiations COM/governments on multi-annual expenditure plans
Read 9 tweets
Philipp Heimberger Profile picture
Jan 16
Let's introduce a permanent EU investment fund for climate and energy bringing additional public investment of 1% of EU GDP per year. In a new study, @alichtenberger_ and I argue this would promote the green transition and strengthen the EU economically and politically. Thread🧵
Meeting the climate goals requires additional investment. The share of public funding for climate investments needs to be significant. Additional of green public investment of at least 1% of EU economic output is need annually, which would help mobilise further private investment
The Covid-19 recovery fund (“Next Generation EU”) could serve as a model for a permanent EU investment fund. EU Commission would issue bonds and distribute money based on conditionality of supporting climate/energy goals. Member states would not be individually liable.
Read 6 tweets
Philipp Heimberger Profile picture
Sep 25, 2022
It's general election day in Italy. I have again seen lots of strange stories and statements on Italy in the international press.

So here's a data-based summary thread that may help in debunking claims about a "profligate, reform-lazy Italy", pulling all of Europe down. 🧵#CAIN
"Italy has been living beyond its means; now Italians finally need to adjust!"

In fact, 🇮🇹 has exported more goods and services than it imported since 2012 - also during the Covid crisis. Italians consume less than they produce - living below their means.
"Italy is just a debt mess at the costs of others in Europe."

In fact, private sector debt is relatively low in Italy compared to other OECD countries, which typically goes unmentioned when people complain about Italy's debt problems.
Read 17 tweets
Philipp Heimberger Profile picture
Sep 24, 2022
Do higher public debt levels reduce economic growth? My meta-analysis is out in Journal of Economic Perspectives. By analysing 816 estimates, I find

-publication bias in favor of negative growth effects
-no uniform public-debt-to-GDP threshold

🧵with summary and free paper link
Reinhart/Rogoff (2010) had an impact on the policy debate; policy-makers used their results (threshold in public-debt-to-GDP of 90% beyond which growth slows) to argue for austerity. But what does the evidence allow us to infer about growth effects of higher public debt? /2
Several papers argue that there is indeed evidence for a negative causal effect of higher public-debt-to-GDP ratios on economic growth, and for a (close to) 90% threshold in the public-debt-to-GDP-ratio beyond which growth falls significantly. /3
Read 17 tweets
Philipp Heimberger Profile picture
Aug 5, 2022
Important: the position paper of the 🇩🇪 government on reforming EU fiscal rules is less hawkish and more nuanced than the recent Handelsblatt interview with finance minister Lindner.
- eliminate debt reduction rule but enforce preventive arm more strictly
- keep structural deficit medium-term target, but focus more on expenditure rule
- commit to importance of investment ("climate-neutral transformation") by adjusting flexibility clauses (but no golden rule)
- set clear criteria under which the fiscal rules will be deactivated in the future
- potentially make the European Fiscal Board independent of the European Commission to improve enforcement.

Source: bmwk.de/Redaktion/DE/D…
Read 6 tweets
Philipp Heimberger Profile picture
Jun 25, 2022
Do corporate tax cuts boost growth? Our paper is out @ European Economic Review. We meta-analyse 441 estimates from 42 studies; results imply: the attention corporate taxation has received as a source of growth has often been exaggerated. With @SGechert 🧵
sciencedirect.com/science/articl…
We analyse the existing corporate tax-economic growth literature. We collect 441 estimates from 42 primary studies. Reported results are ambiguous: Corporate tax cuts increase, reduce, or do not significantly affect growth /2
According to the average of all estimates, a cut in the corporate tax rate by 10 percentage points would signicantly increase annual GDP growth rates by about 0.2 percentage points. This result, however, is driven by publication bias in favour of growth-enhancing effects. /3
Read 7 tweets

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