Bad rules rather than slow discretion? A critical appraisal of EU stabilisation policy

Bernd Lucke () and Bodo R. Neumann ()
Additional contact information
Bernd Lucke: Universität Hamburg
Bodo R. Neumann: Universität Hamburg

International Journal of Economic Policy Studies, 2021, vol. 15, issue 2, No 6, 367-385

Abstract: Abstract The EU reacted swiftly to the economic dimension of Covid-19 by designing new instruments to support the fiscal policy of Member States. But entry into force and implementation was slow due to various political hurdles with little action taking effect by the end of 2020. In a draft law currently under consideration in the European Parliament, the Commission proposes speedier crisis responses using a rules-based approach. We analyse the legal and economic aspects of this so-called “European Investment Stabilisation Function” (EISF) and argue that a rules-based policy may be inefficient and detrimental to important EU policy objectives. For instance, in the Covid-19 crisis, most of the EISF funds would have supported only the wealthiest Member States. In general, we show that well-intended EU-funded stabilisation measures may actually be counterproductive in terms of EU cohesion, suboptimal in terms of stabilisation and regressive in terms of cross-country income distribution.

Keywords: Fiscal union; Stabilisation function; Eurozone budget; Cohesion policy (search for similar items in EconPapers)
JEL-codes: E62 H77 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s42495-021-00063-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:ijoeps:v:15:y:2021:i:2:d:10.1007_s42495-021-00063-4

Ordering information: This journal article can be ordered from
https://www.springer ... policy/journal/42495

DOI: 10.1007/s42495-021-00063-4

Access Statistics for this article

International Journal of Economic Policy Studies is currently edited by Akira Maeda

More articles in International Journal of Economic Policy Studies from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().