Thanks to strong political support and successful vaccination campaigns, the European economy is on the verge of leaving Covid-19 behind.

There are still great uncertainties and risks, but the upswing is now clearly taking hold.

Economic growth this year could even exceed our July forecast of 4.8 percent, and unemployment has almost fallen back to pre-pandemic levels.

Now that things are calm, it is time to resume the pandemic-induced dormant debate on European economic governance.

We need a healthy and broad debate to ensure that the rules reflect changing economic realities and prepare us for the future.

When we began reviewing the rules in place in February 2020, the track record was mixed.

On the one hand, there have been significant successes. The rules have helped to keep public finances under control: the 3 percent deficit ceiling in particular has become the benchmark for avoiding excessive deficits. The rules have also helped correct the balance of payments deficits, which were one of the culprits behind the euro area crisis in the early 2010s. And they served as an important framework for coordinating national economic policies.

On the other hand, we also found weaknesses: debt remained stubbornly high in some countries, budgetary policies remained procyclical, and adjustments were often achieved through cuts in public investment.

Many EU countries also faced low growth potential and persistently low inflation.

Another problem was the complexity of the EU's budgetary rules: they led to less transparency and sometimes to a lack of political commitment to the rules in the capitals.

The unprecedented crisis has made these problems even more apparent.

There are also historical developments that we must also take into account.

First, the need for investment has become more pressing. We estimate the additional need for private and public investments in connection with the green and digital transformation to be almost 650 billion euros per year by 2030. The green transition alone accounts for 520 billion euros annually. An estimated 390 billion euros of this will flow into the energy and transport sector every year - 50 percent more than before. The Development and Resilience Facility will make a major contribution to meeting these needs: it will provide EU countries with grants of € 338 billion and loans of up to € 386 billion by 2026. But we should think now about how national policies can make these investments, which must be financed by both the private and public sectors.can best promote.

Deepened inequality

Second, EU governments have spent almost 19 percent of gross domestic product tackling the health and economic crisis caused by Covid-19.

This was made easier by the activation of the general escape clause of the Stability and Growth Pact.

This fiscal policy support, coupled with strong monetary policy support from the European Central Bank, was crucial for Europe to weather the crisis.

But it also increased debt and deficits.

Therefore, an important aspect of this review will be to consider how our fiscal rules can ensure a gradual reduction in the debt ratio. This is important because sound public finances enable us to respond appropriately to possible future shocks. They also support sustainable growth by keeping financing costs low.

Third, the Covid-19 crisis has deepened inequalities and exacerbated some existing weaknesses. Private debt has increased. The dynamic development of house prices has continued and mortgage debt has risen sharply in some countries. Current account deficits have increased in tourism-dependent countries and the correction of current account surpluses has stalled. The pandemic continues to change our economies and new risks could arise. So we should think about how best to address these challenges in the context of economic governance.

We ask for your comments and contributions to this debate by the end of the year.

In the first quarter of next year, the Commission will present guidelines for fiscal policy for the near future.

These guidelines will reflect the global economic situation, the specific situation of each EU country and the debate on the framework for economic governance.

We will provide guidance on possible changes to this framework in order to create a broad consensus on how to proceed from 2023 in good time.

The European economy is recovering.

However, we need to ensure that growth in the near and far future is both sustainable and permanent.

It is our shared responsibility.

The debate on how to do this begins now.

Valdis Dombrovskis

is Executive Vice President of the European Commission.

Paolo Gentiloni

is EU Commissioner for Economic Affairs.

Keywords: economy, rules, european, governance, pandemic, policies, growth, eu, upswing, debate, support, complexity, reality, risks, unemployment