The Ordoliberal Case for Fiscal Rules: Problem Solving, not Ideology

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Este trabalho se detém na habilidade dos governos estaduais em preservar os benefícios políticos tradicionais do gasto público num ambiente caracterizado pela adoção de regras de austeridade fiscal. O pressuposto é que, não obstante as reformas de estabilização fiscal no Brasil, mantêm-se abertas as janelas de oportunidade para o comportamento fiscal oportunista. A implicação é dúplice: indisciplina fiscal e criação de problemas intertemporais de déficit. O trabalho conclui, então, que o recurso à contabilidade criativa pode explicar situações em que o governante, de quem se espera terminar o mandato quite com as regras, deixa débitos para a gestão sucessora

The abrupt depreciation of the zloty during the subprime crisis and fastrising prices are serious problems, because Poland, having to fulfil five Maastricht criteria, makes the dependence of her domestic inflation on price increases in the EU countries the central point of the discussion about the optimal monetary and fiscal policy rules for the next few years. The primary objective of the paper is to test out some hypotheses about the main sources of the volatility of the Polish zloty / euro exchange rate and inflation in Poland. Because several competing theoretical models describing inflationary processes are widely used, special attention is paid to their empirical verification. The working-hypotheses allowing for the country-specific features of the consumer and producer price inflation are formulated and verified in the paper.

The European Union fiscal architecture combines hard and soft modes of policy coordination that constitute a complex set of fiscal rules and procedures. Since the crisis, the framework has been heavily unbalanced towards the hard mode creating an increasingly rigid and unwieldy system. Its flaws are rooted in the contradictions of the underlying intergovernmental decision-making regime that was strengthened during the crisis - the "new Union method" – and delivers unsatisfactory compromise decisions that hide important divergences among member states. The collective action problems that follow are dealt with by continuous adjustments and interpretations of the fiscal framework that, however, cannot remedy two main problems of intergovernmentalism: i) the inability to forge an aggregate fiscal policy stance and; ii) the weak legitimacy. If institutions are to grow wiser, they should take stock of the fact that even a more extended or refined architecture cannot remedy to these contradictions that risk jeopardizing the entire construction. Therefore, the current preference for procedural adaptation should be replaced by new original answers that punctually address analytically identified flaws while searching for a common fiscal stance, increased accountability for policy-making and responsiveness to participatory demands for democratic legitimacy.

In this article, I will examine the relationship between fundamental rights and financial constraints. The current backdrop is the economic crisis and the austerity policies. This problem requires identifying the following legal historical processes of different nature: a) the construction of a General Theory of the Financial Constitution as a theoretical horizon; b) the development of an International Human Rights law; c) the active intervention of the courts in comparative law, and d) the growing importance of fiscal rules. Indeed, Constitutions are expensive social institutions. State Powers - Executive, legislative and judicial Power - need funding and all fundamental rights consecrated in the Constitutions also need funding, from due legal process to political rights and, of course, social rights. Definitely, there is a direct and conceptual connection between public bodies, fundamental rights, and public financial activities.

The paper analyses the interaction between the fiscal rules applying to European Union member states and the fiscal decentralisation process, which has gained momentum in some European countries since the early 1990s. Three critical areas are identified. First, while compliance with European rules depends on the behaviour of all levels of government, it is the central government that is held accountable; this asymmetry increases the need for rules applying to lower government tiers. Second, European rules demand that the overall budget (both current and capital) be balanced over the medium term; applying this rule at the subnational level may unduly reduce capital outlays. Third, European rules allow for margins to deal with the budgetary effects of the economic cycle; replicating this feature at the subnational level may prove difficult. The paper examines the solutions available in principle to deal with these problems and compares them with those actually adopted by five European countries. It is argued that since European rules call for clear accountability and rapid adjustments, the introduction of explicit domestic rules may have marked advantages over purely co-operative mechanisms. However, the strengthening of consensus-based institutions and procedures has so far been privileged in the countries examined. While cooperation has proved effective in terms of deficit reduction, it may be sub-optimal in terms of the allocation of resources and it may not withstand stress-testing in terms of both economic and institutional developments.

The objective of this paper is to derive the characteristics of an effective governance framework ensuring incentives for conducting a prudent fiscal policy. We study this problem with the use of econometric tools and a sample of 28 European Union Member States between 2003 and 2017. By looking at specific reforms and measures, not only we verify the synthetic effectiveness of fiscal constraints but also we analyse specific elements of the governance framework. Our study shows that fiscal balances are affected not only by the economic cycle, but, among others, by the level of public debt and its cost. We find that the existence of numerical fiscal rules, in that specifically revenue and expenditures rules, their strong legal entrenchment, surveillance mechanisms, sanctions, and flexibility with respect to business cycle have a significant impact on curbing deficits.

This paper argues that the ordoliberal case for fiscal rules does not follow from an ideological impetus, such as an idiosyncratic preference for low government spending, but is an attempt to propose rule-based solutions to various problems associated with unconstrained power to run deficits. The general approach of contemporary ordoliberal reasoning is outlined and applied to the question of fiscal rules. A review of the literature shows that constitutionally unconstrained fiscal policy leads to multiple undesirable consequences. It is argued that there are good reasons to presume that citizens themselves should demand some rule-based control of deficit spending, in order to avoid the high costs associated with increasing debt levels.