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Strengthened EU fiscal framework: fiscal discipline versus economic stabilization

Author(s): Bernhard Grossmann and Gottfried Haber

Date published: Sep 2019

SUERF Policy Note, Issue No 97
by Bernhard Grossmann and Gottfried Haber, Austrian Fiscal Advisory Council
 
 
JEL-codes: E62, H12, H61, H87.
Keywords: Fiscal discipline, fiscal rules, Independent Fiscal Institutions, macroeconomic stabilization, shock absorption instruments, risk sharing.
 
After a peak in 2014, the continuous reduction of general government’s gross debt to GDP ratios within the euro area and the EU-28 and the improvement of the structural budget balance during the last decade might be linked – among others – to the evolvement and strengthening of EU’s fiscal framework in the aftermath of the crisis. Numerical fiscal rules and Independent Fiscal Institutions to monitor the compliance with fiscal rules are main features of an effective surveillance mechanism. However, the legally based requirement of fiscal discipline in the EU might have reduced macroeconomic stabilization facilities of general governments. Fiscal sustainability on the one hand and fiscal space, both on the national levels and the EU level, on the other hand have led to a discussion about the design of fiscal rules and the pros and cons of a (central) fiscal capacity.
 
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SUERF Policy Note, Issue No 97SUERF Policy Note, Issue No 97

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