CEMR calls for investment-friendly EU economic governance reform
The COVID-19 crisis exposed vulnerabilities in Europe’s economic governance and the need to rethink how EU rules support long-term, sustainable investment at all levels of government. In its 2022 position, the Council of European Municipalities and Regions (CEMR) argues that the reform of the EU’s economic governance framework is a vital opportunity to unlock local and regional investment capacity.
Local and regional governments, which account for 45% of public investment in the EU, were heavily impacted by the crisis. While they expanded essential services and supported communities, they also faced falling revenues and limited fiscal space. CEMR warns that without urgent reform, municipalities risk being held back from investing in vital green, digital, and social transitions.
CEMR proposes several key changes:
- Strengthen multi-level governance: Local and regional voices must be involved in economic coordination, including through a reformed European Semester with mandatory application of the partnership principle.
- Recognise investment as a priority: The new framework must distinguish between current spending and long-term, sustainable investment to avoid penalising municipalities for future-oriented projects.
- Grant borrowing flexibility: Local and regional borrowing for structural investments should not be constrained by national debt calculations under the Stability and Growth Pact.
- Establish a European municipal and regional bank: This new facility within the EIB would support local investment, particularly through pooled resources and tailored green or social bonds.
- Support local capacity building: Municipalities need the tools and skills to plan and deliver strategic investments, especially in health, care, and infrastructure.
CEMR also highlights the importance of maintaining local leadership in the implementation of National Recovery and Resilience Plans. Without adequate autonomy, funding, and engagement, the EU’s sustainable recovery goals, particularly those of the Green Deal, risk being delayed or derailed.
Ultimately, CEMR calls for a governance framework that enables, not restricts, local ambition, empowering municipalities and regions to invest in the future of Europe’s communities.
For more information, contact:
Advisor – Territorial Cohesion & Local Finances
