Is the European economic governance framework too “complex”? A critical discussion

Julia del Amo Valor, Marcos Martín Mateos, Diego Martínez and Javier Pérez

No 2023-06, Working Papers from FEDEA

Abstract: Among the many subjects of discussion within the European Fiscal Rules’ debate, the topic of “complexity” has become common over the past decade, both in policy circles and the academic literature. Nonetheless, arguments about complexity and how it affects the usefulness and enforceability of the rules are not very specific. It is common in the academia and media to mention “complexity” as a key to the debate, while keeping its definition vague, and to attach a negative connotation to the term. Based on a database of more than 200 academic papers, we argue that it is useful to group references to “complexity” along three axes: “framework set-up”, “compliance”, and “enforcement”. This classification also allows us to better identify simplification proposals in the literature and assess their strengths and weaknesses. Using this framework, we evaluate the recent legislative proposal by the European Commission for the reform of fiscal rules. Overall, our assessment indicates that the proposal simplifies elements along the first axis, but provides less clear gains in terms of complexity along the two other ones. Finally, we draw lessons for the debate at hand from some branches of the scholarly literature that argue that “complexity” can arise endogenously in certain instances: in particular, more complexity can be the result of aiming at vertical tax equity (taxation literature), appear as result of the market responses to previous regulations (literature on international trade and health regulations), or be a way to create entry barriers for outsiders (theories of bureaucracy).

Date: 2023-08
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