Taking Stock of the EU Fiscal Rules over the Past 20 Years and Options for Reform

Christophe Kamps () and Leiner-Killinger Nadine ()
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Leiner-Killinger Nadine: European Central Bank, Sonnemannstrasse 20, Frankfurt60314, Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2019, vol. 239, issue 5-6, 861-894

Abstract: This paper reviews how the European Union’s fiscal rules have developed from the Maastricht Treaty that established the single monetary policy up until today. It shows that the design of these rules did not always follow economic logic but often resulted from political constraints, giving rise to some flaws in the framework from its very beginning. At the same time, the repeated attempts to adjust the fiscal framework to a multitude of circumstances over the past 25 years have made it overly complex and incoherent. Based on a finding that euro area countries’ compliance with the EU fiscal rules has been unsatisfactory, the paper concludes that in its current shape the Stability and Growth Pact is an insufficient disciplining device in good economic times, with the consequence that there are no fiscal buffers, in particular in high-debt countries, such that growth can be supported in economic troughs. Based on this finding, the paper reviews reform options for making the fiscal framework more effective in bringing about sounder public finances and avoiding the pro-cyclicality observed over the past two decades.

Keywords: economic and monetary union; fiscal rules; stability and growth pact (search for similar items in EconPapers)
JEL-codes: H11 H50 H6 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:239:y:2019:i:5-6:p:861-894:n:4

DOI: 10.1515/jbnst-2018-0090

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