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The Return of Fiscal Policy: Eurozone Macroeconomic Governance after Covid

Author

Listed:
  • Francesco Saraceno

    (OFCE – SciencesPo Paris
    LUISS-SEP Roma)

Abstract

The paper traces the developments of policies and institutions for the EMU in the past decades, linking them to evolutions of the consensus in macroeconomics. The EMU institutions were designed in the 1990s, when the consensus posited a very limited role for the government in business cycles regulation and in fostering growth. Accordingly, the burden of adjustment in the EMU in its current form is on market forces. The paper shows how the global financial crisis moved the cursor back towards an increased role for macroeconomic (most notably fiscal) policy; nevertheless, during the sovereign debt crisis Europe has been impervious to empirical and theoretical developments, remaining tangled in self-defeating austerity policies. The Covid crisis marked a turning point, with EU governments and institutions reacting boldly and quickly. The paper concludes investigating possible paths for reform, capable of adapting the European institutions to the newfound centrality of macroeconomic policies.

Suggested Citation

  • Francesco Saraceno, 2021. "The Return of Fiscal Policy: Eurozone Macroeconomic Governance after Covid," Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science, Fondazione Luigi Einaudi, Torino (Italy), vol. 55(2), pages 191-208, December.
    • Handle: RePEc:fle:journl:v:55:y:2021:i:2:p:191-208
    DOI: 10.26331/1157
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    References listed on IDEAS

    as
    1. Fatás, Antonio & Summers, Lawrence H., 2018. "The permanent effects of fiscal consolidations," Journal of International Economics, Elsevier, vol. 112(C), pages 238-250.
    2. Jérôme Creel & Mario Holzner & Francesco Saraceno & Andrew Watt & Jérôme Wittwer, 2020. "How to spend it. A proposal for a European Covid-19 recovery programme," SciencePo Working papers Main hal-03384646, HAL.
    3. László Andor, 2016. "Towards shared unemployment insurance in the euro area," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-15, December.
    4. Saraceno, Francesco., 2017. "Rethinking fiscal policy lessons from the European Monetary Union (EMU)," ILO Working Papers 994964091602676, International Labour Organization.
    5. Olivier Blanchard & Alvaro Leandro & Jeromin Zettelmeyer, 2021. "Redesigning EU fiscal rules: from rules to standards," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 36(106), pages 195-236.
    6. Francesco Saraceno, 2017. "When Keynes goes to Brussels : a new fiscal rule for the EMU : is it desirable ?," Post-Print hal-03389109, HAL.
    7. repec:hal:spmain:info:hdl:2441/2gtm5um5lm9vvo08gf2gn4a066 is not listed on IDEAS
    8. Francesco Saraceno, 2017. "Rethinking fiscal policy : lessons from the european monetary union," Working Papers hal-03457591, HAL.
    9. Massimo Amato & Everardo Belloni & Paolo Falbo & Lucio Gobbi, 2021. "Europe, public debts, and safe assets: the scope for a European Debt Agency," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(3), pages 823-861, October.
    10. repec:hal:spmain:info:hdl:2441/eul7jlnf19iq8tdp0vlfv63n5 is not listed on IDEAS
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    More about this item

    Keywords

    EMU Reform; Global Financial Crisis; Surrogate Federalism; Debate in Macroeconomics.;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations

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