scholarly journals Fiscal policy and rebalancing in the euro area: A critique of the German debt brake from a post-Keynesian perspective

2014 ◽  
Vol 61 (1) ◽  
pp. 21-38 ◽  
Author(s):  
Eckhard Hein ◽  
Achim Truger
Keyword(s):  
Fiscal Policy ◽  
Euro Area ◽  
Role Model ◽  
Point Of View ◽  
Great Success ◽  
Fiscal Policies ◽  
Success Story ◽  
Debt Brake ◽  
Fiscal Compact ◽  
Alternative Scenarios

The German debt brake is often regarded as a great success story and has therefore served as a role model for the Euro area and it?s Fiscal Compact. In this paper we fundamentally criticise the debt brake. Firstly, we show that it suffers from serious shortcomings and that its success is far from certain even from a mainstream point of view. Secondly, we show that, from a Post-Keynesian perspective, the debt brake completely neglects the requirements for fiscal policies of member countries in a currency union like the Euro area. It will prevent fiscal policy from contributing to the necessary rebalancing in the Euro area. Thirdly, we show that alternative scenarios, which could avoid the deflationary pressures of the German Debt Brake on domestic demand and contribute to internally rebalancing the Euro area, are extremely unlikely as they would have to rely on unrealistic shifts in the functional income distribution and/or investment and savings behaviour in Germany.

scholarly journals The fiscal compact, cyclical adjustment and the remaining leeway for expansionary fiscal policies in the Euro area

2015 ◽  
Vol 62 (2) ◽  
pp. 157-175 ◽  
Author(s):  
Achim Truger
Keyword(s):  
Fiscal Policy ◽  
European Commission ◽  
Economic Crisis ◽  
Euro Area ◽  
Institutional Framework ◽  
Institutional Setting ◽  
Fiscal Policies ◽  
Stability And Growth Pact ◽  
Growth Pact ◽  
Fiscal Compact

Fiscal policy in the Euro area is still dominated by austerity measures implemented under the institutional setting of the ?reformed? stability and growth pact, and the even stricter ?fiscal compact?. At the same time, calls for a more expansionary fiscal policy to overcome the economic crisis have become more frequent, recently. Therefore, the article tries to assess the remaining leeway for a truly expansionary fiscal policy within the existing institutional framework. Special emphasis is put on the method of cyclical adjustment employed by the European commission in order to assess member states? fiscal position and effort. It turns out that even in the existing framework the leeway for a macroeconomically and socially more sensible fiscal policy using the interpretational leeway inherent in the rules is quite substantial.

scholarly journals Changes in the fiscal policy of EU states after the 2008 crisis

2019 ◽  
Vol 55 (1) ◽  
pp. 52-65 ◽  
Author(s):  
Witold Wiliński
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
European Parliament ◽  
Steady Increase ◽  
Fiscal Policies ◽  
National Debt ◽  
Eu Countries ◽  
Fiscal Compact ◽  
The Eu ◽  
Debt Levels

Abstract The aim of this article is an extensive presentation of the fiscal policy conducted by the EU states in the years 2008–2015. The analysis concerns the legal regulations introduced at the EU level by the European Parliament and the Council, as well as the fiscal policies of governments of particular states. The first part of the article analyzes basic macroeconomic data in EU states concerning the level of debt, the level of gross domestic product (GDP) redistribution, and the level of economic growth in the analyzed period. The second part discusses the legal acts adopted by the European Parliament and the Council (the so-called ‘sixpack’ and the European Fiscal Compact), aimed at improving macroeconomic balance and ensuring supervision over the proper functioning of national finances. The third part analyzes the discretionary fiscal policies pursued in EU states. The main conclusions of this article are as follows: (i) EU countries recorded higher national debt levels and debt growth rates between 2008 and 2015 than most non-EU Organisation for Economic Co-operation and Development (OECD) countries; (ii) despite legal measures taken by the European Council and the European Commission in the form of the sixpack and the European Fiscal Compact, and despite discretionary fiscal measures such as in the form of the European Economic Recovery Plan, five EU countries (Cyprus, Greece, Italy, Portugal, and Spain) have experienced a steady increase in their national debt levels; and (iii) deep reforms in the composition and level of government expenditure are a prerequisite for reducing national debt levels and for achieving satisfactory economic growth in these countries.

scholarly journals Treaty on Stability, Coordination and Governance in the Economic and Monetary Union as an Instrument of Fiscal Policy Coordination in the European Union

2013 ◽  
Vol 4 (2) ◽  
pp. 5-20 ◽  
Author(s):  
Kamil Kotliński
Keyword(s):  
European Union ◽  
Fiscal Policy ◽  
Monetary Union ◽  
Policy Coordination ◽  
Economic And Monetary Union ◽  
Fiscal Policies ◽  
The European Union ◽  
Euro Zone ◽  
Fiscal Compact ◽  
Fiscal Policy Coordination

The aim of this study is to assess the Treaty on Stability, Coordinationand Governance in the Economic and Monetary Union as an instrument fiscalpolicy coordination and identify some of the consequences that potentially carriesits use. All EU-members conduct independent fiscal policies, regardless of whetherthey are members of the euro zone or not. It is now known that one of the immediatecauses of the crisis in part the euro zone countries was permanent crossingfiscal convergence criteria as a result of an erroneous and irresponsible fiscalpolicy. Used so far forms of coordination of fiscal policies were too weak to preventthe destabilization of the Member States' public finances. The crisis has becomethe impetus for build deeper integration in the area of fiscal policy. Treaty onStability, Coordination and Management, called briefly Fiscal Compact or TSCG,is another instrument of fiscal policy coordination in the European Union. In largepart it is a repetition and a little evolution of the Stability and Growth Pact. Thisstudy indicated some disadvantages of the Fiscal Compact, what has the potentialto lead to its inefficiency. These are: reference to the structural balance, which isa relatively small transparency budgetary rule for the public opinion and becauseof the existence of several competing methods for its calculation; the Treaty providesfor the possibility of "extraordinary circumstances" and does not specify theterm balanced budget, which is a softening of fiscal discipline and opens opportunitiesfor political bargaining; financial penalties imposed on overdebt governmentswill not improve their situation. The Treaty on Stability, Management and Coordination does not constitute a breakthrough in the coordination of fiscal policiesin the European Union.

Discretionary fiscal policy in the Euro area: Past, present and future

2020 ◽  
pp. 55-85
Author(s):  
Francesco Caprioli ◽  
Marzia Romanelli ◽  
Pietro Tommasino
Keyword(s):  
Fiscal Policy ◽  
Euro Area ◽  
Discretionary Fiscal Policy

Evaluation of Fiscal Policy Effect of China’s Photovoltaic Industry

2018 ◽  
pp. 111-116 ◽  
Author(s):  
Gang AN ◽  
Hang WANG
Keyword(s):  
Fiscal Policy ◽  
Research And Development ◽  
Operating Performance ◽  
Fiscal Policies ◽  
Micro Data ◽  
Policy Effect ◽  
Policy Suggestions ◽  
Asset Size ◽  
The Empirical Analysis

To explore the role of fiscal policies in promoting the development of photovoltaic industry, the effects of financial subsidies on the development of China’s photovoltaic industry were analyzed by using the micro data of listed companies. The empirical analysis results in this study indicate that the fiscal policies represented by financial subsidies play a remarkable positive impetus function and financial subsidies are positively correlated with the operating performance of Photovoltaic enterprises. With larger the asset size and higher the Research and Development (R&D) investments, the operating performance of Photovoltaic enterprises is the better. Based on the above results, this study puts forward some policy suggestions on optimizing fiscal policy tools and further promoting the development of photovoltaic industry.

scholarly journals The Fiscal Compact and the European Constitutions: ‘Europe Speaking German’

2012 ◽  
Vol 8 (1) ◽  
pp. 1-7 ◽  
Author(s):  
LB ◽  
JHR
Keyword(s):  
European Union ◽  
Czech Republic ◽  
Monetary Union ◽  
Euro Area ◽  
Economic And Monetary Union ◽  
Economic Policies ◽  
The European Union ◽  
The Czech Republic ◽  
The United Kingdom ◽  
Fiscal Compact

In between the writing of this editorial and the publication of this issue of EuConst, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, in everyday parlance the ‘Fiscal Compact’, will have been signed by the representatives of the governments of the contracting parties — the member states of the European Union minus the United Kingdom and the Czech Republic. The Fiscal Compact is intended to foster budgetary discipline, to strengthen the coordination of economic policies and to improve the governance of the euro area.

scholarly journals Relative Effectiveness of Monetary and Fiscal Policies on Output Stabilization in Developing Countries: Evidence from Rwanda

2017 ◽  
Vol 10 (1) ◽  
pp. 220
Author(s):  
Kabanda Richard ◽  
Peter W. Muriu ◽  
Benjamin Maturu
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Relative Effectiveness ◽  
Variance Decomposition ◽  
Var Model ◽  
Fiscal Policies ◽  
Impulse Responses ◽  
Exogenous Variables ◽  
Output Stabilization ◽  
The Government

The aim of this study was to explain the relative effectiveness of monetary and fiscal policies in explaining output in Rwanda. The study used a sample of quarterly data for the period 1996-2014. Applying a recursive VAR, the study used 12 variables, including 5 endogenous and 7exogenous variables to the benchmark model and other two specifications were attempted to capture the true contribution of monetary and fiscal policies to variations in nominal output. Obtained results using impulse responses and variance decomposition provide evidence that monetary policy is more effective than fiscal policy in explaining changes in nominal output in Rwanda. In addition, monetary policy explains better output when the VAR model contains domestic exogenous variables than when they are not included, suggesting the relevance of including domestic exogenous variables in VAR specification of monetary and fiscal policies effectiveness on economic variables. Another suggestion is that in order to achieve higher growth, the government of Rwanda should rely more on monetary policy as compared to fiscal policy.

Cooperative Monetary and Fiscal Policies in the Euro Area

2018 ◽  
Vol 85 (1) ◽  
pp. 217-234 ◽  
Author(s):  
Willi Semmler ◽  
Alexander Haider
Keyword(s):  
Euro Area ◽  
Fiscal Policies
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