The Enforcement Dilemma of EU Fiscal Rules

Georg Kirchsteiger and Martin Larch

Economics and Politics, 2025, vol. 37, issue 2, 699-708

Abstract: Effective enforcement is an essential element of any fiscal rule. The EU's Stability and Growth Pact has been struggling with this truism since inception. We show that its effectiveness goes beyond the threat of fines. The notion that deficit‐prone member states adopt a more virtuous fiscal behaviour to avert sanctions is overshadowed by the realization that in the event of a major shock virtuous countries will come to their rescue as the survival of the entire system is at stake. Unless the underlying issues are addressed, the effectiveness of any EU fiscal rule remains limited.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ecopol:v:37:y:2025:i:2:p:699-708

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