Europe’s and Denmark’s prosperity and transition have been held back by unnecessarily tight fiscal rules.
First, a rapid green transition requires that the ability to finance green infrastructure, innovation and climate adaptation is not tied up too tightly.
Second, to maintain popular support for the transition, fiscal policy must become more functional, securing both full employment and low inflation.
The fiscal frameworks in Denmark and the EU therefore need critical scrutiny.
Fiscal policy should aim at full employment, low inflation and other policy objectives. It should not be governed by budget and debt rules that are often set at arbitrary or politically convenient levels.
Fiscal appropriations will remain necessary for public investment in green infrastructure, R&D, innovative green procurement and risk-sharing with private actors. These decisions must increasingly be justified by risks and opportunities rather than by known costs and benefits.
We need a better view of the macroeconomic benefits of investing more in green electrification. These include the balance of payments, employment and resilience to inflation.
