The European Central Bank as the Only Game in Town: How Could Fiscal Policy Makers Play Along?

Abstract

Abstract The Maastricht Treaty clearly separated the domains of the single monetary policy and the national fiscal policies. This article examines what national fiscal policy-makers could do together to more actively support the ECB in maintaining price stability for the eurozone when the monetary policy rate reaches the effective lower bound, while keeping their sovereignty. The appropriate euro area fiscal stance is constrained by the need for member countries to find a balance between their budgetary contribution to macroeconomic stabilisation and requirements for achieving and maintaining fiscal sustainability. Euro area countries could nevertheless strengthen fiscal and structural policy coordination in the Eurogroup and establish a central fiscal capacity subject to common decision-making with the objective to provide for a growth-friendly economic policy mix for the euro area. Die Europaische Zentralbank als einziges Spiel in der Stadt: Wie konnten die Fiskalpolitiker mitspielen? Zusammenfassung De...