Reforming Fiscal Governance in the European Union

By Michal Andrle, John C Bluedorn, Luc Eyraud, Tidiane Kinda, Petya Koeva Brooks, Gerd Schwartz, Anke Weber

May 21, 2015

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Michal Andrle, John C Bluedorn, Luc Eyraud, Tidiane Kinda, Petya Koeva Brooks, Gerd Schwartz, and Anke Weber. Reforming Fiscal Governance in the European Union, (USA: International Monetary Fund, 2015) accessed December 21, 2024

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary

Successive reforms have brought many positive elements to the European Union’s fiscal framework. But they have also increased its complexity. The current system involves an intricate set of fiscal constraints, which hampers effective monitoring and public communication. Compliance has also been weak. This note discusses medium-term reform options to simplify the framework and improve compliance. Based on model simulations and practical considerations, it argues for moving to a two-pillar approach, with a single fiscal anchor (public debt-to-GDP) and a single operational target (an expenditure growth rule, possibly with an explicit debt correction mechanism) linked to the anchor.

Subject: Expenditure, Fiscal governance, Fiscal policy, Fiscal stance, Public debt

Keywords: Balance rule, Correction mechanism, Debt, Debt benchmark criterion, Debt correction, European Economic, Expenditure rule, Fiscal Governance, Fiscal Policy, Fiscal Rules, Fiscal stance, Global, Monetary Union, Rule, SDN

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Staff Discussion Notes No. 2015/009
Stock No:

SDNEA201509
ISBN:

9781498338288
ISSN:

2617-6750

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