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The European Commission will this year begin to assess the green transition of EU states as part of its monitoring of national budgets, a top official said, in a new sign of the bloc's commitment to meet ambitious climate goals.

The commission is responsible for making sure member countries do not overspend public resources. It annually assesses whether governments' spending, revenues and investments are reasonably balanced and do not excessively flout debt and deficit ceilings set in EU rules.

Worried that environmental and other climate-related costs could worsen governments' fiscal positions, the commission will now also check the pace of governments' transition towards a carbon-neutral economy by 2050.

"For the first time in the commission's economic monitoring of national budgets we will have a green variable, which is very important," EU economics commissioner Paolo Gentiloni told reporters.

He said European finance ministers would discuss the matter at meetings in Brussels that were underway and would continue on Tuesday.

"It's a change of perspective. When we assess budgets we need to look at expenditures, investments, but also at the results and pace of the green transition," he added.

It is unclear how this new attention to the fiscal impact of climate policies could change the way Brussels puts pressure on states to correct their fiscal policies.

The commission could adopt a more benign approach to countries' investments in renewable energies or other measures to reduce carbon emissions. Low-growth, high-debt Italy is asking for that spending to be allowed even when a country's deficit or debt is already above EU limits.

Gentiloni, a former socialist prime minister of Italy who became EU commissioner in December, is heeding that call. But a decision on how to treat green investments has not been made yet, an EU official said.

That could come as part of a review of EU fiscal rules that Brussels plans to unveil in February.

France, Italy and other southern countries of the bloc are keen to soften the rules, seen by many as excessively rigid and complicated. That could spur growth and favour the green transition, supporters of the move say. But Germany has so far resisted changes, fearing fiscal leeway could unleash uncontrolled spending in some countries and cause financial crises.

Copyright Reuters, 2020

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