EU Governments Must not Return to Their Dysfunctional Fiscal Rules

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Achim Truger
Keyword(s):  
Fiscal Policy ◽  
Interest Rates ◽  
Policy Coordination ◽  
Fiscal Rules ◽  
Stability And Growth Pact ◽  
Euro Crisis ◽  
Growth Pact ◽  
Nominal Interest Rates ◽  
The Cost ◽  
Emergency Measures

Abstract Fiscal rules such as the European Stability and Growth Pact and the German debt brake have been suspended in the Covid19-pandemic in order to provide emergency measures and to overcome the crisis. Now, the controversial debate is back again: When should governments return to fiscal rules? Should they return to fiscal rules, at all? This article argues that it is not so much a question whether governments should return to fiscal rules at all, but to which kind of rules they should return. Following the deficit bias argument and the need for fiscal policy coordination in a monetary union some kind of limitation for government debt and some kind of fiscal rules may easily be justified. However, that does not mean that governments should return exactly to the previously existing rules, because these are economically flawed. Recently the argument for reform has become even stronger due to new empirical evidence about the macroeconomic effectivity of fiscal policy, the experience of the dysfunctionality of the existing rules during the Euro crisis and the fact that the cost of public debt has been reduced dramatically because of persistently low if not negative nominal interest rates.

Fiscal Policy Coordination

2019 ◽  
pp. 14-25
Author(s):  
Charlotte Rommerskirchen
Keyword(s):  
Fiscal Policy ◽  
Historical Context ◽  
Policy Coordination ◽  
Economic Recovery ◽  
Stability And Growth Pact ◽  
Growth Pact ◽  
Legal Power ◽  
The Stability ◽  
Key Aspects ◽  
Fiscal Policy Coordination

This chapter sets the scene for this study by providing historical context and introducing the key aspects, processes, and players of fiscal policy coordination. In so doing it charts key developments of pre-crisis fiscal policy coordination, before turning to the creation of the European crisis agreement, the European Economic Recovery Plan (EERP), and finally the reform packages post-crisis. Despite impressions to the contrary, the procedures for fiscal policy coordination are extensive, albeit enforced and reinforced with little political and legal power. Although there is persistent continuity for some ideas and procedures—the Stability and Growth Pact (SGP) and its fear of stability free riding chief among them—new innovations and reforms have made inroads.

Discretion Rather Than Rules

2019 ◽  
pp. 90-109
Author(s):  
Charlotte Rommerskirchen
Keyword(s):  
Fiscal Policy ◽  
Free Riding ◽  
Fiscal Rules ◽  
Policy Outcomes ◽  
Stability And Growth Pact ◽  
The Great Recession ◽  
Policy Responses ◽  
Growth Pact ◽  
Hard Times ◽  
The Stability

Solutions to free riding, whether stability or growth free riding, are thought to be found in the provision of incentives. Yet the empirical findings of this chapter suggest that domestic fiscal rules, such as debt brakes, did not impact on the fiscal policy responses to the Great Recession. Similarly, EU-level agreements (the Stability and Growth Pact (SGP) and the newly created European Economic Recovery Plan (EERP)) did not impact on fiscal policy choices. First, the majority of domestic fiscal rules were equipped with exceptionality clauses. As a result, they did not impose stern constraints on fiscal policy in hard times. Second, the EERP and SGP were meaningless for fiscal policy outcomes; member states adopted stimulus programs as they saw fit with little concern for EU-level agreements or EU-wide aims for stability and growth.

scholarly journals Analysis of Fiscal Rules in the European Monetary Union

2015 ◽  
Vol 4 (1) ◽  
pp. 19-33 ◽  
Author(s):  
Damir Šehović
Keyword(s):  
Fiscal Policy ◽  
Policy Coordination ◽  
Fiscal Rules ◽  
Fiscal Policies ◽  
Convergence Criteria ◽  
Member States ◽  
Growth Pact ◽  
Fiscal System ◽  
The Stability ◽  
The Eu

Abstract : The EMU fiscal system is specific in many areas compared to other classic fiscal systems of national states. Specific features mainly reflect in the implementation of economic policy within the EMU which is carried out by combining a common centralized monetary policy under the ECB jurisdiction and decentralized fiscal policies under the jurisdiction of the member states. The member states` sovereignty in governing their fiscal policies is one of the key causes of the EU fiscal system underdevelopment, i.e. its indigent structure in relation to “standard fiscal systems”. More indigent structure of the EU fiscal system is reflected in the fact that it consists of only three segments. The first one refers to the EU budget which is also the only instrument for implementing fiscal policy at the supranational level. The second one refers to the harmonization of taxation systems in accordance with inputs and other legislation adopted at the EU level with the aim of fostering the single internal market. Finally, the third segment refers to the fiscal policy coordination of the EMU member states related to appropriate fiscal rules, which mainly stem from the Maastricht convergence criteria and the Stability and Growth Pact.

scholarly journals Effectiveness of Fiscal Policy Coordination Rules in the Monetary Union

Equilibrium ◽  
2012 ◽  
Vol 7 (3) ◽  
pp. 73-91
Author(s):  
Bernadeta Baran
Keyword(s):  
Fiscal Policy ◽  
Monetary Union ◽  
Policy Coordination ◽  
Economic And Monetary Union ◽  
Fiscal Policies ◽  
Stability And Growth Pact ◽  
Common Currency ◽  
Member States ◽  
Rule Based ◽  
Growth Pact

Stability and Growth Pact is the main rule-based framework for the coordination of national fiscal policies in the economic and monetary union (EMU). It was established to safeguard sound public finances, an important requirement for EMU to function properly. Member states had a lot of determination before setting up a monetary union (nominal criteria were a condition to adopt common currency). In the next years, coordination of fiscal policy was not so successful. In many countries, revenues were temporarily boosted by tax-rich activity, while they didn’t restrict their expenditures. In most countries fiscal policy was pro-cyclical (not anti-cyclical) and they didn’t achieve their MTO. Financial crisis has sharpened budgetary problems in member states and showed the weakness of coordination rules.

Braucht die EU einen flexibleren Stabilitätspakt?

2004 ◽  
Vol 53 (1) ◽  
Author(s):  
Carsten Hefeker ◽  
Friedrich Heinemann ◽  
Klaus F. Zimmermann
Keyword(s):  
Public Awareness ◽  
Time Lag ◽  
Fiscal Rules ◽  
External Control ◽  
Public Expenditures ◽  
Stability And Growth Pact ◽  
Consolidation Process ◽  
Growth Pact ◽  
Long Run ◽  
The Stability

AbstractIn his contribution Carsten Hefeker points out that most of the official arguments concerning the necessity of the Stability and Growth Pact are not convincing. Nevertheless, a mechanism that credibly avoids excessive debts and deficits is needed in most member states. It would be more useful, however, if such rules would focus on overall debt rather than on deficits. In addition, he advocates to create an external control for such fiscal rules, independent from the Commission and ECOFIN. He concludes that the Pact does not need to become more flexible, but more credible.Friedrich Heinemann states that much of the recent reform debate on the Stability Pact is based on a fundamental misconception: The Pact has not been established as a guiding tool for welfare - maximising politicians, but in order to limit detrimental incentives from fiscal short-sightedness. “Stupid” elements like the three-per-cent deficit ceiling have a clear and beneficial strategic function as boundary within the national budgetary process. Furthermore, simple rules are superior to smart ones in increasing the political costs of high deficits in terms of public awareness. The critique on the pact′s missing flexibility is correct mainly regarding its lose logical link to long-run sustainability. Increasing flexibility in a cyclical sense, however, is not a reform priority. Already today the Pact leaves sufficient leeway for responsible politicians. Instead, the reform focus must be on depoliticising the pact in the sense of limiting Council power in the deficit procedure. More flexibility must not come without depoliticising. He recommends that any reform should only be carried into effect with a significant time lag in order to limit the reputation damage which would be the consequence of any quick institutional response to the Pact′s recent crisis.In his paper Klaus F. Zimmermann argues that the Stability and Growth Pact (SGP) has been subject to criticism ever since its inception. He points out that it overlooks business cycle developments within the framework of the consolidation process; it adopts a too short-term view of the stabilisation target which is also hardly under control of policy-makers; and it deals with policy imperfections in a sub-optimal way. Therefore, a reform of the SGP is urgent. The author suggests that the rules must be handled more flexibly. In his opinion, a mediumterm budgetary target and a focus on public expenditures to tackle the pro-cyclical bias is needed. To restore credibility, the task of supervision should be transferred to an independent European institution.

THE EFFECT OF FISCAL POLICY ON THE SHORT-RUN RELATION BETWEEN NOMINAL INTEREST RATES AND INFLATION

1987 ◽  
Vol 25 (1) ◽  
pp. 27-42 ◽  
Author(s):  
VICTOR A. CANTO ◽  
GERALD NICKELSBURG ◽  
PAUL RIZOS
Keyword(s):  
Fiscal Policy ◽  
Interest Rates ◽  
Nominal Interest Rates ◽  
Short Run

scholarly journals Fiscal and Other Rules in EU Economic Governance: Helpful, Largely Irrelevant or Unenforceable?

2017 ◽  
Vol 239 ◽  
pp. R3-R13 ◽  
Author(s):  
Iain Begg
Keyword(s):  
Political Economy ◽  
Fiscal Rules ◽  
The Political ◽  
Stability And Growth Pact ◽  
Economic Governance ◽  
Eu Member States ◽  
Growth Pact ◽  
Macroeconomic Imbalances ◽  
Eu Economic Governance ◽  
The Eu

EU Member States, particularly in the Euro Area, have been pushed to adopt more extensive and intrusive fiscal rules, but what is the evidence that the rules are succeeding? The EU level Stability and Growth Pact (SGP) has been – and remains – the most visible rule-book, but it has been complemented by a profusion of national rules and by new provisions on other sources of macroeconomic imbalance. Much of the analysis of rules has concentrated on their technical merits, but tends to neglect the political economy of compliance. This paper examines the latter, looking at compliance with fiscal rules at EU and Member State levels and at the rules-based mechanisms for curbing other macroeconomic imbalances. It concludes that politically driven implementation and enforcement shortcomings have been given too little attention, putting at risk the integrity and effectiveness of the rules.

scholarly journals La acelerada tramitación parlamentaria de la reforma del artículo 135 de la Constitución : especial consideración a la inadmisión de enmiendas. Los límites al derecho de enmienda en la reforma constitucional

2012 ◽  
pp. 165 ◽  
Author(s):  
Piedad García-Escudero Márquez
Keyword(s):  
The State ◽  
Fiscal Rules ◽  
Constitutional Amendment ◽  
Stability And Growth Pact ◽  
Autonomous Communities ◽  
Public Deficit ◽  
Growth Pact ◽  
Effective System ◽  
The Stability ◽  
Regional Governments

Tras el establecimiento de la “restricción europea” al déficit público, la derivada del Tratado de Maastricht y del Pacto de Estabilidad y Crecimiento, las Comunidades Autónomas han estado sujetas a reglas fiscales relativas al déficit y a la deuda, así como a la gestión de sis presupuestos. Esta normativa, sin embargo, no evitó que algunas Comunidades incumplieran los objetivos se estabilidad persupuestaria probablemente porque carecía de un eficaz sistema de sanciones. Este trabajo examina el alcance de la reforma del art. 135 de la Constitución, y especialmente se centra en el margen de maniobra que el nuevo artículo atribuye al Estado para imponer a los gobiernos autonómicos el cumplimiento de los límites de déficit y deuda.After the introduction of the “European restriction” to public deficit, resulting from the Treaty of Maastricht and the Stability and Growth Pact, the Autonomous Communities have been subject to formal fiscal rules with regard to the deficit and the debt, as well as the management of their budgets. However, this regulation did not prevent some Autonomous Communities failed to comply with the budgetary stability objectives, probably because it lacked an effective system of sanctions. This paper examines the scope of the constitutional amendment of article 135, and focuses particularly on the margin of maneuver that new article 135 gives the State to impose the regional governments meet the deficit and debt limits.

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