Abstract

There was a widespread consensus on the need to modify fiscal rules in the EU even before the COVID-19 crisis. The aim of this article is to reflect on the reform of fiscal rules from a broader perspective, looking at three different dimensions: the political economy of fiscal rules in the current political and economic environment, the renewed debate about fiscal policy roles and objectives, as well as the current incomplete nature of the European Monetary Union and the prospects for its completion. The main contribution of this paper is to analyse EMU fiscal policy and the related governance modes from a broader perspective. Furthermore, the article briefly discusses ideas for a new model of fiscal and economc surveillance based on a cooperative governance system in order to better fit with with current macroeconomic and political realities.

Highlights

  • There was a widespread consensus on the need to modify fiscal rules in the EU even before the COVID-19 crisis

  • The aim of this article is to reflect on the reform of fiscal rules from a broader perspective, looking at three different dimensions: the political economy of fiscal rules in the current political and economic environment, the renewed debate about fiscal policy roles and objectives, as well as the current incomplete nature of the European Monetary Union and the prospects for its completion

  • Even before the COVID-19 crisis, which has led to the suspension of the Stability and Growth Pact (SGP) through the activation of the general escape clause to be invoked in a severe economic downturn, there was a widespread consensus on the need to modify fiscal rules configuration

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Summary

Adapting the EU Economic Governance to New Macroeconomic and Political Realities

There was a widespread consensus on the need to modify fiscal rules in the EU even before the COVID-19 crisis. The aim of this article is to reflect on the reform of fiscal rules from a broader perspective, looking at three different dimensions: the political economy of fiscal rules in the current political and economic environment, the renewed debate about fiscal policy roles and objectives, as well as the current incomplete nature of the European Monetary Union and the prospects for its completion. This article is based on Fargnoli (2020) and discusses the reform of fiscal rules across three different dimensions: i) the political economy of fiscal rules in the current political and economic environment; ii) the renewed debate about fiscal policy roles and objectives; iii) the current incomplete nature of the European Monetary Union (EMU) and the prospects for its completion. The implications for fiscal and economic policy coordination, in particular regarding the need to recover from the coronavirus crisis and to manage its long-term consequences

The political economy of fiscal rules
The return of fiscal policy
Unregulated national fiscal policies
Fiscal relations and common instruments in an incomplete EMU
Findings
Towards a cooperative and robust governance system
Full Text
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