The Composition Effect of New Fiscal Rules in the Euro Area

2017 ◽  
pp. 69-84
Author(s):  
Jérôme Creel ◽  
Francesco Molteni
Keyword(s):  
Euro Area ◽  
Fiscal Rules ◽  
Composition Effect

Do Spanish fiscal regimes follow the euro-area trends? Evidence from Markov-Switching fiscal rules

2016 ◽  
Vol 59 ◽  
pp. 484-494 ◽  
Author(s):  
Alejandro Ricci-Risquete ◽  
Julián Ramajo ◽  
Francisco de Castro
Keyword(s):  
Euro Area ◽  
Markov Switching ◽  
Fiscal Rules ◽  
Fiscal Regimes

Moderation is waning in Italy-EU conflict

2019 ◽  
Keyword(s):  
European Commission ◽  
Euro Area ◽  
Fiscal Rules ◽  
Right Wing ◽  
Content Type ◽  
Borrowing Costs ◽  
Deficit Reduction ◽  
Parallel Currency ◽  
Excessive Deficit Procedure ◽  
The Eu

Subject Italy's budget conflict. Significance June 5 marked a resumption in hostilities between Italy and the EU, after the European Commission sent a letter to Rome saying its spending plans were breaking EU fiscal rules. The Commission will now begin the process of implementing an excessive deficit procedure (EDP) against Italy aimed at reducing its deficit and debt. This will likely involve deficit reduction measures that could precipitate the collapse of the populist government. Impacts If an EDP is blocked, efforts to launch it will start again in September if Italy’s budget preview shows Rome not complying with EU rules. An EDP could lead to higher borrowing costs and make it more difficult for Rome to reduce its excessive debt, which is around 132% of GDP. A League-led right-wing government would push for aggressive tax cuts, potentially leaving Italy in the same predicament that it faces now. The implementation of a parallel currency to boost the supply of money would fuel concerns that Italy is prepared to leave the euro-area.

Searching for new fiscal rules in the euro area: a new proposal

2021 ◽  
Vol 18 (2) ◽  
pp. 145-159
Author(s):  
Jan Priewe
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
Public Debt ◽  
Fiscal Rules ◽  
The European Union ◽  
Growth Pact ◽  
Fiscal Compact ◽  
The Face ◽  
The Stability ◽  
Interest Payments

While the European Union (EU) fiscal rules are suspended in the years 2020–2022, new rules are in the making and might be activated in 2023. If the old rules were used again, massive austerity would be required in the face of the strongly elevated level of public debt and the gap to the 60 per cent debt cap in the EU Treaty. A new proposal is suggested in this article which requires only small changes in the Treaty and/or the Fiscal Compact, but a strong overhaul in secondary law, that is, the Stability and Growth Pact. The key ideas are to use net interest payments, as a share of GDP, as the new metric for defining debt sustainability rather than gross public debt. This would allow the adjustment of the rules to changing monetary environments, especially interest-rate levels, and changing differentials between interest rates and growth rates. This way, much more fiscal space would be generated both for higher-debt and lower-debt member states and the entire euro area.

EU fiscal reform will be modest at best

2021 ◽  
Keyword(s):  
Euro Area ◽  
Tax Policy ◽  
Political Instability ◽  
Fiscal Rules ◽  
Fiscal Reform ◽  
Member States ◽  
Social Unrest ◽  
Content Type

Significance Member states will start to negotiate possible reform of the fiscal rules in October, aiming for agreement by March. The outcome will be vital for spending and tax policy across the euro-area over the coming years. Impacts Pressure will grow on hawkish member states to exempt areas relating to the green and digital transitions from strict spending rules. Premature fiscal tightening would likely result in political instability in Spain and Italy. Soaring prices could trigger social unrest and put pressure on governments to cut certain taxes.

scholarly journals Fiscal and financial conditions for a stronger euro area

2020 ◽  
Vol 17 (2) ◽  
pp. 183-193
Author(s):  
Vítor Constâncio
Keyword(s):  
Euro Area ◽  
Capital Market ◽  
Deposit Insurance ◽  
Fiscal Rules ◽  
Banking Union ◽  
Macroprudential Policy ◽  
Financial Conditions ◽  
New Challenges ◽  
Design Deficiencies

The euro is irreversible but it needs reform to address well-known design deficiencies and also new challenges. Although progress has been made, further steps are needed, the most important of which are: revision of the fiscal rules, establishing a central stabilisation capacity, and completing the banking union (especially a deposit insurance, a capital market union based around a common safe asset, and improved macroprudential policy). This article sets out the necessary reforms in these areas in detail.

Taking Stock of the EU Fiscal Rules over the Past 20 Years and Options for Reform

2019 ◽  
Vol 239 (5-6) ◽  
pp. 861-894
Author(s):  
Christophe Kamps ◽  
Nadine Leiner-Killinger
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Maastricht Treaty ◽  
Fiscal Rules ◽  
Stability And Growth Pact ◽  
Public Finances ◽  
The Past ◽  
Growth Pact ◽  
The Stability ◽  
The Eu

Abstract This paper reviews how the European Union’s fiscal rules have developed from the Maastricht Treaty that established the single monetary policy up until today. It shows that the design of these rules did not always follow economic logic but often resulted from political constraints, giving rise to some flaws in the framework from its very beginning. At the same time, the repeated attempts to adjust the fiscal framework to a multitude of circumstances over the past 25 years have made it overly complex and incoherent. Based on a finding that euro area countries’ compliance with the EU fiscal rules has been unsatisfactory, the paper concludes that in its current shape the Stability and Growth Pact is an insufficient disciplining device in good economic times, with the consequence that there are no fiscal buffers, in particular in high-debt countries, such that growth can be supported in economic troughs. Based on this finding, the paper reviews reform options for making the fiscal framework more effective in bringing about sounder public finances and avoiding the pro-cyclicality observed over the past two decades.

Recommendations

2020 ◽  
pp. 303-330
Author(s):  
Menelaos Markakis
Keyword(s):  
Euro Area ◽  
Technical Assistance ◽  
Fiscal Rules ◽  
Banking Union ◽  
Euro Crisis ◽  
Member States ◽  
Capital Markets Union ◽  
The Eu ◽  
Transparency And Accountability

This chapter draws together the implications of the Euro crisis for the EU and its Member States and critically evaluates the shortcomings of the Treaty schema in terms of transparency and accountability. The discussion begins with the measures intended to ‘complete’ and ‘deepen’ the Economic and Monetary Union (EMU). It sets out the author’s own view regarding the key reforms that would be necessary, albeit one that is informed by the proposals made by the EU institutions. These include a reform of the EU fiscal rules; the provision of technical assistance to Member States implementing structural reforms; establishing a Euro area stabilization function; completing the Banking Union and making progress towards a Capital Markets Union; and strengthening the role of EU financial watchdogs. This chapter further puts forward a number of concrete proposals on how to bolster transparency and accountability in the area of EMU, the dividing line being between those proposals that could be implemented without a Treaty amendment and those reforms that would require a Treaty revision. It further addresses separately accountability (and transparency) in the Banking Union, as well as the role of EU courts in the EMU.

scholarly journals The Euro Area Imbalances Narrative in a Franco-German Perspective: The Importance of the Longer-Run View

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Ansgar Belke ◽  
Daniel Gros
Keyword(s):  
Fiscal Policy ◽  
Euro Area ◽  
Fiscal Rules ◽  
Value Chains ◽  
Structural Reforms ◽  
Base Period ◽  
Export Prices ◽  
Long Run ◽  
Wage Moderation ◽  
Distributional Consequences

AbstractThere is a symmetrical debate in two Euro area core countries: in France about the restrictive fiscal policy of Germany, leading to a huge external surplus, in Germany about the insufficient compliance with fiscal rules and the lack of structural reforms in France. What are the real causes of the divergence between the two economies? We show that different indicators of competitiveness yield very different results depending on the base period used, e.g. 1995 (peak of reunification boom), 1999 or 1990. A comparison with the pre-unification period shows little gain in competitiveness. We also find, somewhat surprisingly, that Germany’s industry is not more integrated in international value chains than that of France or Italy. We then look at the link between export growth and export prices and argue that in the long run exports are not driven by competitiveness but by the increased supply of labor resulting from unification. In addition, we ask what drove ‘wage moderation’ in Germany: policy or the labor market. We finally analyse the longer-term trend in fiscal policy and the resulting distributional consequences in both countries. Our more general policy implication is that any analysis which compares today to the trough of German performance after unification risks over-estimating the potential of the country. Given that the ‘internal unification’ process is complete now, one should not expect the Germans to continue to outperform France as it has done over the last two decades.

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