European Public Policies and Sovereign Risk in the Eurozone: How State-Contingent Governance Hampers Fiscal Discipline

Ad van Riet

The Economists' Voice, 2023, vol. 20, issue 2, 147-168

Abstract: The 30 years old Maastricht Treaty on European Union (EU) is based on the political vision that a stable euro requires sound budgetary policies and sustainable public finances in all the participating countries. This article reviews how the European framework for managing sovereign risk in the Economic and Monetary Union (EMU) has evolved in challenging times. The main finding is that over the years European policymakers have applied a range of special provisions contingent on the state of national economies, the demand for public investment, the need for a sound financial system, the effectiveness of monetary transmission, or on general concerns with the integrity of the eurozone, in a way which hampers fiscal discipline. The growing prominence of this state-contingent governance could mark the political transition from the Maastricht Treaty’s focus on public risk reduction to a ‘Next Generation EMU’ which favours public risk sharing. The challenge in designing the future EMU architecture will be to balance the need to preserve the integrity of eurozone with the need for fiscal discipline.

Keywords: Economic and Monetary Union; fiscal discipline; Maastricht Treaty; sovereign risk; state-contingent public policies (search for similar items in EconPapers)
JEL-codes: E5 F36 F45 G28 H6 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/ev-2023-0013 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:evoice:v:20:y:2023:i:2:p:147-168:n:4

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/ev/html

DOI: 10.1515/ev-2023-0013

Access Statistics for this article

The Economists' Voice is currently edited by Michael Cragg, Dwight Jaffee and Joseph Stiglitz

More articles in The Economists' Voice from De Gruyter
Bibliographic data for series maintained by Peter Golla ().