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How to Reform Europe’s Fiscal Policy Framework

Author

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  • Lars Calmfors
  • Giancarlo Corsetti

Abstract

The current budgetary problems of some EU member states have intensified the debate on Europe’s fiscal policy framework. It is not enough to change the interpretation of the Stability and Growth Pact. More fundamental revisions of the EU Treaty are needed in order to strike a reasonable balance between longrun sustainability and short-run flexibility. The ceiling on budget deficits should be conditioned on the government debt level, such that the scope for stabilisation policy in downswings is increased in low-debt countries. In addition, the enforcement of the rules should be depoliticised: decisions on sanctions against states violating the rules should be transferred from the political level of the Council of Ministers to the judicial level of the European Court of Justice.

Suggested Citation

  • Lars Calmfors & Giancarlo Corsetti, 2003. "How to Reform Europe’s Fiscal Policy Framework," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 4(1), pages 109-116, January.
    • Handle: RePEc:wej:wldecn:130
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    File URL: https://www.worldeconomics.com/Journal/Papers/Article.details?ID=130
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    1. repec:hal:wpspec:info:hdl:2441/2842 is not listed on IDEAS
    2. repec:spo:wpecon:info:hdl:2441/2842 is not listed on IDEAS
    3. Lars Calmfors, 2012. "Can the Eurozone Develop into a Well-functioning Fiscal Union?," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(01), pages 10-16, April.
    4. Francesco Saraceno & Paola Veroni, 2004. "A Simple Proposal for a Debt Related Fiscal Rule," SciencePo Working papers Main hal-01020550, HAL.
    5. Francesco Saraceno & Paola Veroni, 2005. "Reform of the Stability and Growth Pact: Reducing or Increasing the Nuisance," Working Papers hal-03462247, HAL.
    6. Amy K. Filipek & Till Schreiber, 2010. "The Stability and Growth Pact: Past Performance and Future Reforms," Working Papers 97, Department of Economics, College of William and Mary.
    7. Beetsma, Roel & Debrun, Xavier, 2005. "Implementing the stability and growth pact: enforcement and procedural flexibility," Working Paper Series 433, European Central Bank.
    8. Seppo Honkapohja & Frank Westermann, 2009. "Fiscal Policy and Macroeconomic Stabilisation in the Euro Area: Possible Reforms of the Stability and Growth Pact and National Decision-Making Processes," Palgrave Macmillan Books, in: Seppo Honkapohja & Frank Westermann (ed.), Designing the European Model, chapter 6, pages 177-228, Palgrave Macmillan.
    9. Leopold Diebalek & Walpurga Köhler-Töglhofer & Doris Prammer, 2006. "Reform of the Stability and Growth Pact," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/06, pages 78-109.
    10. repec:spo:wpmain:info:hdl:2441/2842 is not listed on IDEAS
    11. repec:hal:spmain:info:hdl:2441/2842 is not listed on IDEAS
    12. Francesco Saraceno & Paola Veroni, 2005. "Reform of the Stability and Growth Pact: Reducing or Increasing the Nuisance," SciencePo Working papers Main hal-03462247, HAL.

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