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Here to Stay? The Return of Fiscal Policy and Challenges for the EU Governance

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  • Francesco Saraceno

Abstract

The reaction of European Union's (EU) policy makers to the Covid-19 shock was bold and timely; although they could not avoid a crisis whose dimensions made the 2007- 2008 Global Financial Crisis pale by comparison, the governments’ titanic effort managed, with the support of EU institutions, to mitigate its impact on incomes and employment. This came as a welcome change after the calamitous management of the sovereign debt crisis. But it is precisely the extraordinary dimension of the crisis that prompts the question of whether the activism of economic policy denoted a change in the mindset of EU governments and institutions, or simply was the only option available to policymakers to avoid the collapse of their economies. This paper tries to answer the question through an assessment of the debate on Eurozone reform, with a focus on the "New Kid in Town": fiscal policy.

Suggested Citation

  • Francesco Saraceno, 2022. "Here to Stay? The Return of Fiscal Policy and Challenges for the EU Governance," Review of Economics and Institutions, Università di Perugia, vol. 13(1-2).
    • Handle: RePEc:pia:review:v:13:y:2022:i:1-2:n:2
    DOI: 10.5281/zenodo.7579850
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    References listed on IDEAS

    as
    1. Francesco Saraceno, 2017. "When Keynes goes to Brussels : a new fiscal rule for the EMU : is it desirable ?," SciencePo Working papers Main hal-03389109, HAL.
    2. Francesco Saraceno, 2017. "When Keynes Goes to Brussels: A New Fiscal Rule for the EMU?," Annals of the Fondazione Luigi Einaudi. An Interdisciplinary Journal of Economics, History and Political Science, Fondazione Luigi Einaudi, Torino (Italy), vol. 51(2), pages 131-157, December.
    3. Jean‐Paul Fitoussi & Francesco Saraceno, 2008. "Fiscal Discipline as a Social Norm: The European Stability Pact," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1143-1168, December.
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    5. Fatás, Antonio & Summers, Lawrence H., 2018. "The permanent effects of fiscal consolidations," Journal of International Economics, Elsevier, vol. 112(C), pages 238-250.
    6. Fabrizio Balassone & Daniele Franco, 2000. "Public investment, the Stability Pact and the ‘golden rule’," Fiscal Studies, Institute for Fiscal Studies, vol. 21(2), pages 207-229, June.
    7. Olivier Blanchard & Francesco Giavazzi, 2002. "Current Account Deficits in the Euro Area: The End of the Feldstein Horioka Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 147-210.
    8. Sebastian Gechert & Ansgar Rannenberg, 2018. "Which Fiscal Multipliers Are Regime‐Dependent? A Meta‐Regression Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 32(4), pages 1160-1182, September.
    9. Francesco Saraceno, 2017. "When Keynes goes to Brussels : a new fiscal rule for the EMU : is it desirable ?," Post-Print hal-03389109, HAL.
    10. Blanchard, Oliver & Cerutti, Eugenio & SUmmers, Lawrence, 2015. "Inflation and Activity - Two Explorations and Their Monetary Policy Implications," Working Paper Series 15-070, Harvard University, John F. Kennedy School of Government.
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    12. Francesco Saraceno, 2016. "The ECB: a reluctant leading character of the EMU play," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(2), pages 129-151, August.
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    More about this item

    Keywords

    Fiscal policy; EMU; Stability and Growth Pact; Covid Crisis; Sovereign Debt Crisis; Fiscal Rules; Central Fiscal Capacity;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • 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
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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