Improving compliance with the EU fiscal framework through stronger ownership and enforcement

Henk Van Noten, Elva Bova, Gilles Mourre and Christian Weise

Quarterly Report on the Euro Area (QREA), 2023, vol. 21, issue 4, 49-58

Abstract: This section examines compliance with the EU fiscal framework over the last decade. The corrective arm turned out to be an effective tool for reducing and maintaining government deficits below the 3% of GDP reference value of the Treaty. By contrast, fiscal performance under the preventive arm has been heterogeneous across Member States. The degree of compliance is linked to national ownership and to effective enforcement. As regards enforcement, the evidence illustrates that the EU did not fully use the available tools. The evidence also shows a weak compliance with national rules, pointing to a lack of ownership also vis-à-vis the national fiscal framework. The section also presents avenues for improvement. First, a stronger medium-term dimension could better meet national needs and capacities, with respect not only to fiscal adjustment but also to planned reforms and public investments. Second, simplification of the framework could improve compliance, for example, by relying on a single operational indicator rather than a complex set of rules. Third, a stronger involvement of national independent fiscal institutions can increase ownership. Finally, the use of a broader range of enforcement tools in the surveillance process, with a greater use of reputational sanctions and an operationalisation of the debt-based EDP linked to a realistic and simple requirement, could improve enforcement.

Keywords: stability and growth pact; debt sustainability; growth-friendly fiscal adjustment (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:euf:qreuro:0214-04

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