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Reforming the EU fiscal framework: A proposal by the European Fiscal Board

Beetsma R., Thygesen N., Cugnasca A., Orseau E. , Eliofotou P., Santacroce S., (2018), «Reforming the EU fiscal framework: A proposal by the European Fiscal Board», VoxEU.org, 25 Οκτωβρίου

While today the need for fiscal rules is higher than ever, it is increasingly recognised that the Stability and Growth Pact (SGP) is not up to its task and requires a deep overhaul. In 2016, the Dutch presidency of the Council first stressed the need to simplify the rules and strengthen their medium-term orientation (Dutch Council Presidency 2016). In May 2017, the European Commission also called for a review of EU fiscal rules as part of the overall process of completing the EMU (European Commission 2017). The European Fiscal Board published its proposal for reforming the SGP in the 2018 Annual Report (European Fiscal Board 2018). Recommendations from international institutions (IMF, OECD) and the lively VoxEU debate on euro reform suggest that some convergence of opinion is beginning to emerge, both on the need for reform and on the main direction this reform should take (e.g. Bénassy‐Quéré et al. 2018,Conseil d’Analyse Économique 2018, German Council of Economic Experts 2018, Heinemann 2018).

Reforming the rules is particularly important at the present juncture – governments must take advantage of the current environment to prepare for the next crisis. Further, it is important to recall that EU fiscal rules are part of a broader set of policy tools. For instance, the precautionary credit lines of the ESM require compliance with the SGP as one of the eligibility criteria.1 The same is true for the European Investment Stabilisation Function (EISF) recently proposed by the European Commission as part of the new multiannual financial framework (European Commission 2018a). A simpler, more transparent and more predictable framework is thus an essential component of the whole process of EMU deepening.

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