The New Fiscal Rules - another round of austerity for Europe?

Christoph Paetz () and Sebastian Watzka ()
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Christoph Paetz: Macroeconomic Policy Institute (IMK)
Sebastian Watzka: Macroeconomic Policy Institute (IMK)

No 176-2024, IMK Policy Brief from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: This policy brief presents the new EU fiscal rules with a focus on its core element, the so-called debt-sustainability-analysis (DSA). Our results suggest first that the new rules will lead to substantial fiscal consolidation in the next years albeit less severe than the austerity measures during the euro crisis, second that the new rules are far less beneficial for public investment than previously thought, and third that relatively minor changes to the DSA assumptions on ageing costs and interest rates can have important consequences for fiscal adjustment needs. However, even if some of the assumptions underlying the DSA methodology were to be changed, the additional fiscal space would still fall drastically short of the massive public investment needs of the EU's green transition. We conclude by making the case for an EU-wide debt-financed investment fund.

Keywords: EU Fiscal rules; fiscal rules; debt-sustainability analysis; DSA; ageing costs (search for similar items in EconPapers)
Pages: 19 pages
Date: 2024
New Economics Papers: this item is included in nep-eec and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:imk:pbrief:176-2024

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