William De Vijlder

Limiting global warming will require huge investments, which will partly have to come from the public sector. This could lead to a crowding-out effect. Higher public borrowing requirements could push up interest rates and weigh on private investments. In the near-term such a risk seems remote. On the contrary, there could be a crowding-in effect with a reduction in climate-related risk and positive second-round effects from green public investments stimulating private investments. To reduce the risk that financial markets would exclusively focus on the impact on public indebtedness, governments should communicate clearly on the nature of their investments, insisting that they should have a return which is a multiple of the borrowing cost.

The German finance minister has made a plea for the creation of a pan-European unemployment fund. Being able to borrow from the fund would require having contributed in the past as well as having met certain criteria in terms of economic policy. This form of risk-sharing would soften the impact of downturns and hence would be an important contribution to strengthen the eurozone.

For the government to be formed after the elections, boosting potential GDP growth should be a key objective in view of its impact on public finances and the labour market.

Climate change and climate-related events can have profound consequences for society, the economy and business. Coping with these externalities does not depend solely on government initiative. The decision of the private sector to take them into account when buying or producing—internalising them—can make a big difference.