Advertisement

Fiscal Policies and the EU’s Governance: Only Rules and a Lack of Stabilisation Measures

  • Enrico Marelli
  • Marcello Signorelli
Chapter
  • 1.1k Downloads

Abstract

The chapter begins with an illustration of the perceived low default risk in the first decade after the birth of Economic and Monetary Union (EMU), together with an explanation of the rationale behind the rules on public budgets applied to members of monetary unions. It then illustrates the deterioration of public accounts and sovereign debts that has occurred since the recent crises that hit the euro area. The chapter also explains the content of the Stability and Growth Pact (SGP, and its various reforms) and the Fiscal Compact. Critical discussion is conducted of the ‘austerity policies’ adopted in the Eurozone in recent years, emphasising their deep impact on the real economies, especially of the weakest euro area countries, and the ‘self-defeating’ nature of such policies.

Keywords

Default risk Public accounts Stability and Growth Pact (SGP) Fiscal Compact Austerity policies 

References

  1. Auerbach, A. J., & Gorodnichenko, Y. (2012). Measuring the output responses to fiscal policy. American Economic Journal: Economic Policy, 4(2), 1–27Google Scholar
  2. Baldwin, R., & Giavazzi, F. (2015b). Introduction. In R. Baldwin & Giavazzi, F. (Eds.), The Eurozone crisis: a consensus view of the causes and a few possible solutions. VoxEU.org. London: CEPR Press.Google Scholar
  3. Baldwin, R., & Giavazzi, F. (Eds.) (2016). How to fix Europe’s monetary union: views of leading economists. VoxEU eBook. London: CEPR Press.Google Scholar
  4. Blanchard, O., & Leigh, D. (2013). Growth forecast errors and fiscal multipliers. IMF Working Paper 13/1, January.Google Scholar
  5. Blyth, M. (2013). Austerity: the history of a dangerous idea. Oxford: Oxford University Press.Google Scholar
  6. Boyer, R. (2012). The four fallacies of contemporary austerity policies: the lost Keynesian legacy. Cambridge Journal of Economics, 36(1), 283–312.CrossRefGoogle Scholar
  7. Brunila, A., Buti, M., Franco, D. (Eds.) (2001). The stability and growth pactthe architecture of fiscal policy in EMU. Basingstoke: Palgrave.Google Scholar
  8. Buti, M., & Sapir, A. (Eds.) (1998). Economic Policy in EMU. Oxford: Clarendon Press.Google Scholar
  9. Chalk, N., & Hemming, R. (2000). Assessing fiscal sustainability in theory and practice. International Monetary Fund Working Paper, 81.Google Scholar
  10. Christiano, L., Eichenbaum, M., Rebelo, S. (2011). When is the government spending multiplier large?. Journal of Political Economy, 119(1), 78–121.CrossRefGoogle Scholar
  11. EC, European Commission. (2012). Blueprint for a deep and genuine EMU. Brussels.Google Scholar
  12. EC, European Commission. (2016a). Fiscal sustainability report 2015. Brussels.Google Scholar
  13. EC, European Commission. (2016b). European economic forecast. Spring. Brussels.Google Scholar
  14. ECB, European Central Bank. (2006). Monthly bulletin, n. 2.Google Scholar
  15. ECB, European Central Bank. (2014, August 22). Unemployment in the Euro area. Speech by Mario Draghi, President of the ECB, Annual central bank symposium in Jackson Hole.Google Scholar
  16. Eyraud, L. and Anke, W. (2013, March). The challenge of debt reduction during fiscal consolidation. IMF Working Paper 13/67.Google Scholar
  17. Gechert, S., & Rannenberg, A. (2014). Are fiscal multipliers regime dependent? A meta regression analysis IMF Working paper, No. 139.Google Scholar
  18. Giavazzi, F., & Pagano, M. (1990). Can severe fiscal contractions be expansionary? Tales of two small European countries. In O. J. Blanchard & S. Fischer (Eds.), NBER macroeconomics annual 1990 (pp. 75–111). Cambridge, MA: MIT Press.Google Scholar
  19. Hartwell, C., & Signorelli, M. (2016). Sustainability of Public Budgets. In J. Hölscher & H. Tomann (Eds.), The Palgrave Dictionary of Emerging Markets and Transition Economics. London and New York: Palgrave Macmillan.Google Scholar
  20. IMF, International Monetary Fund. (2012, October). World economic outlook: coping with high debt and sluggish growth.Google Scholar
  21. Jordà, O., & Taylor, A. M. (2016). The time for austerity: estimating the average treatment effect of fiscal policy. The Economic Journal, 126, 219–255.CrossRefGoogle Scholar
  22. Marelli, E. & Signorelli, M. (2010c). Employment, productivity and models of growth in the EU. International Journal of Manpower, 31(7), 732–754.CrossRefGoogle Scholar
  23. McKinnon, R. (1996). Default risk in monetary union. background report for the Swedish Government Commission on EMU, Stockholm.Google Scholar
  24. Micossi, S. (2016). Balance-of-payment adjustment in the Eurozone. In R. Baldwin & F. Giavazzi (Eds.).  How to fix Europe’s monetary union: views of leading economists. VoxEU eBook. London: CEPR Press.Google Scholar
  25. Perotti, R. (2011). The ‘Austerity Myth’: gain without pain?. NBER Working Paper 17571.Google Scholar
  26. Portes, J. (2012, October 31). Self-defeating austerity. Social Europe Journal.Google Scholar
  27. Reinhart, C. M., & Rogoff, K. S. (2014). Recessions and recoveries. Recovery from financial crises: evidence from 100 episodes. American Economic Review, 104(5), 50–55.CrossRefGoogle Scholar
  28. Schick, A. (2005). Sustainable budget policy: concepts and approaches. OECD Journal on Budgeting, 5(1), 107–126.CrossRefGoogle Scholar
  29. Shambaugh, J. C. (2012). The Euro’s three crises. In D. Acemoglu, J. Parker, M. Woodford (Eds.), NBER macroeconomics annual, 27, 157–231.Google Scholar
  30. Tabellini, G. (2016b). Building common fiscal policy in the Eurozone. In R. Baldwin & Giavazzi, F. (Eds.). How to fix Europe’s monetary union: views of leading economists. VoxEU eBook. London: CEPR Press.Google Scholar

Copyright information

© The Author(s) 2017

Authors and Affiliations

  • Enrico Marelli
    • 1
  • Marcello Signorelli
    • 2
  1. 1.University of BresciaBresciaItaly
  2. 2.University of PerugiaPerugiaItaly

Personalised recommendations