Fiscal policy in EMU: Rules, discretion and political incentives

Marco Buti and Paul Van den Noord

No 206, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: The fiscal philosophy of EMU's budgetary rules is to bring deficits close to balance and then let automatic stabilisers play freely. Given the large tax and benefit systems in Europe, relying mainly on automatic stabilisation would allow a relatively high degree of cyclical smoothing while avoiding the typical pitfalls of fiscal activism. While this is, in most circumstances, good economic policy, it is evidently not regarded as good politics. The current difficulties of EMU's fiscal policy framework have little to do with its alleged fault lines and much to do with the resurgence of electoral budget cycles amid a weak system of incentives to abide by the agreed rules.

Keywords: EMU; economic and monetary union; fiscal policy; taxation; budgetary regulation; Marco Buti; van den Noord (search for similar items in EconPapers)
Pages: 43 pages
Date: 2004-07
References: Add references at CitEc
Citations: View citations in EconPapers (54)

Downloads: (external link)
https://ec.europa.eu/economy_finance/publications/pages/publication686_en.pdf (application/pdf)

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:euf:ecopap:0206

Access Statistics for this paper

More papers in European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission Contact information at EDIRC.
Bibliographic data for series maintained by ECFIN INFO ().