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The call for a European fiscal framework overhaul, already outlined by the EU’s Economic Governance review, has been strengthened by the economic and social impact of the pandemic. Building on the EU objective to achieve a green and just transition, we operationalise and compare two options for a qualified treatment of green and social public investment: exemption (the ‘Golden Rule’) and amortisation.

As a first step, we provide a detailed classification of the eligible expenditures based on desired (green and social) outcomes, disentangle between capital and current government spending, and assess the existing green and proposed social taxonomy. As a second step, we provide quantitative estimates, according to a set of alternative scenarios, of the two types of qualified treatment (exemption and amortisation) for social spending and determine their legal feasibility with and without amendments to the Treaties.

We conclude that a proper effort to categorise green and social public investment is still lacking, as well as the capacity to quantify the budgetary impact of these investments. Moreover, we raise concerns about the technical possibility of including human capital expenditures within the label of public investment and the need for a case-by-case identification of investments. Finally, we state that an amortisation rule on the entire capital stock would be more restrictive for social investment, whereas a golden rule applied to net investments would possibly have a broader scope