scholarly journals Effectiveness of Fiscal Policy Coordination Rules in the Monetary Union

Equilibrium ◽  
2012 ◽  
Vol 7 (3) ◽  
pp. 73-91
Author(s):  
Bernadeta Baran
Keyword(s):  
Fiscal Policy ◽  
Monetary Union ◽  
Policy Coordination ◽  
Economic And Monetary Union ◽  
Fiscal Policies ◽  
Stability And Growth Pact ◽  
Common Currency ◽  
Member States ◽  
Rule Based ◽  
Growth Pact

Stability and Growth Pact is the main rule-based framework for the coordination of national fiscal policies in the economic and monetary union (EMU). It was established to safeguard sound public finances, an important requirement for EMU to function properly. Member states had a lot of determination before setting up a monetary union (nominal criteria were a condition to adopt common currency). In the next years, coordination of fiscal policy was not so successful. In many countries, revenues were temporarily boosted by tax-rich activity, while they didn’t restrict their expenditures. In most countries fiscal policy was pro-cyclical (not anti-cyclical) and they didn’t achieve their MTO. Financial crisis has sharpened budgetary problems in member states and showed the weakness of coordination rules.

scholarly journals Analysis of Fiscal Rules in the European Monetary Union

2015 ◽  
Vol 4 (1) ◽  
pp. 19-33 ◽  
Author(s):  
Damir Šehović
Keyword(s):  
Fiscal Policy ◽  
Policy Coordination ◽  
Fiscal Rules ◽  
Fiscal Policies ◽  
Convergence Criteria ◽  
Member States ◽  
Growth Pact ◽  
Fiscal System ◽  
The Stability ◽  
The Eu

Abstract : The EMU fiscal system is specific in many areas compared to other classic fiscal systems of national states. Specific features mainly reflect in the implementation of economic policy within the EMU which is carried out by combining a common centralized monetary policy under the ECB jurisdiction and decentralized fiscal policies under the jurisdiction of the member states. The member states` sovereignty in governing their fiscal policies is one of the key causes of the EU fiscal system underdevelopment, i.e. its indigent structure in relation to “standard fiscal systems”. More indigent structure of the EU fiscal system is reflected in the fact that it consists of only three segments. The first one refers to the EU budget which is also the only instrument for implementing fiscal policy at the supranational level. The second one refers to the harmonization of taxation systems in accordance with inputs and other legislation adopted at the EU level with the aim of fostering the single internal market. Finally, the third segment refers to the fiscal policy coordination of the EMU member states related to appropriate fiscal rules, which mainly stem from the Maastricht convergence criteria and the Stability and Growth Pact.

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.

Fiscal Policy Coordination

2019 ◽  
pp. 14-25
Author(s):  
Charlotte Rommerskirchen
Keyword(s):  
Fiscal Policy ◽  
Historical Context ◽  
Policy Coordination ◽  
Economic Recovery ◽  
Stability And Growth Pact ◽  
Growth Pact ◽  
Legal Power ◽  
The Stability ◽  
Key Aspects ◽  
Fiscal Policy Coordination

This chapter sets the scene for this study by providing historical context and introducing the key aspects, processes, and players of fiscal policy coordination. In so doing it charts key developments of pre-crisis fiscal policy coordination, before turning to the creation of the European crisis agreement, the European Economic Recovery Plan (EERP), and finally the reform packages post-crisis. Despite impressions to the contrary, the procedures for fiscal policy coordination are extensive, albeit enforced and reinforced with little political and legal power. Although there is persistent continuity for some ideas and procedures—the Stability and Growth Pact (SGP) and its fear of stability free riding chief among them—new innovations and reforms have made inroads.

Theoretical approaches on the possible existence of a stabilising economic policy in Europe

2016 ◽  
Vol 43 (5) ◽  
pp. 815-834 ◽  
Author(s):  
Alessandro Morselli
Keyword(s):  
Fiscal Policy ◽  
Cooperative Games ◽  
Policy Coordination ◽  
Fiscal Policies ◽  
Policy Mix ◽  
Member States ◽  
Content Type ◽  
Theoretical Approaches ◽  
Non Cooperative Games ◽  
Fiscal Policy Coordination

Purpose The purpose of this paper is to investigate whether there is room for a stabilising fiscal policy, through an analysis of the supporters of the new classical economics and the supporters of the new Keynesian economics. There are no reliable results on the Keynesian and non-Keynesian effects of fiscal policies. As such, the policy-mix becomes a problem of theoretical approach, in the sense of a strategic game between monetary authorities and tax authorities (among them). This points to the problem of coordination between budgetary authorities as being the central debate within the Eurozone. The end-result is that without fiscal policy coordination, Eurozone member states are working on a series of non-cooperative games that are inefficient, because no player can improve its position by unilaterally changing its strategy. Design/methodology/approach The analysis starts from the experience of three countries in the 1980s, these are Denmark, Ireland and Sweden. In all three cases the adoption of restrictive budget policies has provoked a strong, rapid and enduring resizing of public debt, and growth did not weaken, moreover it accelerated. In all three cases the logic behind the policy-mix actions allowed the individualisation of the respective roles of fiscal and monetary policies. Fiscal policies were joining with fiscal instruments and reduction in public spending and furthermore monetary policy was accommodated in respect of the budget contraction. Findings First, the authors were not able to identify an analytical method that can ensure the success of a fiscal policy. Second, analysing fiscal policies within the Eurozone implies also that the authors reflect on the need for a coordination of these policies. In fact, the authors have shown how the possible coordination of economic policies in the Eurozone would result in major benefits for all member countries. Originality/value In the absence of fiscal policy coordination, member states are engaged in a series of non-cooperative games that prove inefficient, when no player is able to improve its position by unilaterally changing its fiscal policy. The coordination of national fiscal policies generates a collective advantage, bringing each state to consistently change its strategies.

Institutionelle Alternativen in der Europäischen Union: Das Beispiel des Stabilitäts- und Wachstumspaktes

2006 ◽  
Vol 55 (2) ◽  
Author(s):  
Renate Ohr ◽  
André Schmidt
Keyword(s):  
Monetary Union ◽  
European Monetary Union ◽  
Allocative Efficiency ◽  
Stability And Growth Pact ◽  
European Monetary ◽  
Fiscal Deficits ◽  
Member States ◽  
Growth Pact ◽  
The Stability

AbstractThe Stability and Growth Pact is one of the constituent pillars of the European Monetary Union. Though, meanwhile it is obvious that it will not be able to limit fiscal deficits of the member states. For this reason in this paper Coase′s thinking in institutional alternatives is applied to find a better way to increase the incentives for more fiscal stability. We present and discuss tradable deficit permits comprising market-orientated incentives for fiscal stability. It is shown that tradable deficit permits are superior from a politico-economical view as well as with regard to allocative efficiency.

EU Governments Must not Return to Their Dysfunctional Fiscal Rules

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Achim Truger
Keyword(s):  
Fiscal Policy ◽  
Interest Rates ◽  
Policy Coordination ◽  
Fiscal Rules ◽  
Stability And Growth Pact ◽  
Euro Crisis ◽  
Growth Pact ◽  
Nominal Interest Rates ◽  
The Cost ◽  
Emergency Measures

Abstract Fiscal rules such as the European Stability and Growth Pact and the German debt brake have been suspended in the Covid19-pandemic in order to provide emergency measures and to overcome the crisis. Now, the controversial debate is back again: When should governments return to fiscal rules? Should they return to fiscal rules, at all? This article argues that it is not so much a question whether governments should return to fiscal rules at all, but to which kind of rules they should return. Following the deficit bias argument and the need for fiscal policy coordination in a monetary union some kind of limitation for government debt and some kind of fiscal rules may easily be justified. However, that does not mean that governments should return exactly to the previously existing rules, because these are economically flawed. Recently the argument for reform has become even stronger due to new empirical evidence about the macroeconomic effectivity of fiscal policy, the experience of the dysfunctionality of the existing rules during the Euro crisis and the fact that the cost of public debt has been reduced dramatically because of persistently low if not negative nominal interest rates.

Eu Fiscal Governance on The Member States: The Stability and Growth Pact and Beyond

2020 ◽  
Author(s):  
Jean-Paul Keppenne
Keyword(s):  
Economic Policy ◽  
Fiscal Policy ◽  
Maastricht Treaty ◽  
Stability And Growth Pact ◽  
Member States ◽  
The Core ◽  
Growth Pact ◽  
Fiscal Planning ◽  
The Stability

As explained in the previous chapter, the Maastricht Treaty put in place a mild system of coordination in the area of economic policy, in particular fiscal policy. The Member States keep conducting their fiscal policy, particularly the adoption of budgets and the exercise of taxation power which are at the core of the sovereignty of the states. The Member States thus remain largely sovereign with regard to the conduct of their budgetary policies given that their annual budget, as well as their longer-term fiscal planning are still decided by the national authorities. The Union has no competence to interfere directly in this area acting in place of the national authorities. Notably, no veto right is provided, and the Union could not somehow prevent the adoption of national budgets.

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