Fiscal councils in European Union. A short retrospective review and current challenges in terms of functionality and effectiveness

Bogdan Capraru and George Georgescu

Working Papers of Romania Fiscal Council from Romania Fiscal Council

Abstract: The EU countries have set up independent fiscal institutions (IFIs), mainly following the global financial crisis of 2008-2009, with a mandate to objectively assess the fiscal policy and its performance. The paper focuses on reviewing the activity of EU IFIs, trying to highlight their typology, minimum operating standards, channels of influence, effectiveness assessments, and their current mission in the 2020 context of the COVID-19 pandemic. Given the differences in the mandates with which IFIs are invested between the EU countries, the European Commission has recommended a set of common principles, among these, sufficient human and financial resources, a high degree of flexibility in the resources allocation, the access to relevant information, the Comply or Explain procedure, the protection against political interferences. Formally, IFIs do not have the power to intervene on fiscal and budgetary policies, but they have a “soft” power of influence, exercised by increasing public attention to these policies, based on two pillars: credibility and communication. From this point of view, IFIs can be considered as an “accountability-multiplier”. There is a consensus that one of the best practices of IFIs in the EU is to conclude MoUs with the budgetary authorities, as the main tool for operating according to the minimum standards. In the context of the current fight to mitigate the economic and social impact of the SARS-CoV-2 virus pandemic, the European Commission has, for the first time, activated the general escape clause of the SGP, enabling the national governments to take measures to support the economy in order to cope with the crisis. Under these conditions, the IFIs' mission is drastically reduced, at least during the period of activation of the clause, but they must continue to be active in the economic arena. In the exceptional circumstances of this situation it must bear in mind that, once the health crisis will be enough controlled to allow the normal resumption of economic activities, the need to monitor and apply the fiscal principles will return in force.

Keywords: fiscal responsibility; IFIs mandate; fiscal rules; MoU; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: G28 H30 H60 H87 O23 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2020-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ane:wpcfro:200801

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