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Reforming Economic Governance in the Eurozone: Shifting Spending Instead of Expanding Debt Margins

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  • Clemens Fuest

Abstract

In February 2020, the European Commission announced that it would present a plan for reforming the economic governance of the Eurozone, including the rules for public debt. The project was postponed by the outbreak of the corona pandemic, but now the reform is to come. There is a widespread demand to expand debt leeway, for example for climate protection spending. In view of the already very high national debt and rising inflation, this is the wrong way to go. Fiscal policy coordination should focus more on expenditure reallocations and thus on improving the quality, not the quantity of public spending. What is needed is a modified handling of the existing rules, not a change in the rules themselves.

Suggested Citation

  • Clemens Fuest, 2022. "Reforming Economic Governance in the Eurozone: Shifting Spending Instead of Expanding Debt Margins," EconPol Policy Brief 42, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:econpb:_42
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    File URL: https://www.ifo.de/DocDL/EconPol-PolicyBrief_42.pdf
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    Cited by:

    1. Xiaoshan Chen & Spyridon Lazarakis & Petros Varthalitis, 2023. "Debt targets and fiscal consolidation in a two country HANK model: the case of Euro Area," Working Papers 2023_02, Durham University Business School.
    2. Xiaoshan Chen & Spyridon Lazarakis & Petros Varthalitis, 2023. "Debt targets and fiscal consolidation in a two-country HANK model for the Euro Area," Working Papers 374162075, Lancaster University Management School, Economics Department.

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