Reconciling fiscal and environmental sustainability in the Eurozone

Fiscal restraint looks inevitable in the Eurozone following the pandemic, especially if the !scal rules are reinstated. How to match this with the need to !nance the climate transition? Two possible routes are explored. One is the adoption of a ‘green golden rule’, with the structural de!cit limit (or ‘Medi- um Term Objective’) increased by 1% of GDP. Alternatively, new borrowing capacity could be created at the centre through a ‘European Climate Fund’, involving some redistribution towards countries most in need of abatement. Either way, !nancing the energy transition – now more urgent than ever in view of the Ukrainian war – could be achieved within the con!nes of the 60% of GDP debt constraint.