The New European Fiscal Framework: ruling out Fiscal Policies or what else?

In this paper I discuss whether the replacement of a ‘rule-based system’ relying on common quantitative benchmarks, as is the case with the current Stability and Growth Pact framework, by a ‘standard-based model’, the model underlying the proposal for a revised Fiscal Framework presented by the Commission, has managed, on the one hand, to overcome the previous criticisms made of SGP’s main legal elements (its ‘preventive’ and ‘corrective’ arms) and, on the other, to verify whether this proposal risks ‘ruling out’ Member State fiscal policies with its intended ‘national ownership’ goal and new flexibility devices. Using insights from political economy, I address this latter point in the light of four contraposing perspectives: firstly, fiscal rules versus fiscal standards (or rules versus discretion); secondly, centralization versus decentralization of budgetary restraints; thirdly, accepting or not accepting Independent Fiscal Institutions; finally, procyclicality versus anti-cyclicality of fiscal policies in the presence of budgetary restraints.