Independent Fiscal Institutions in the EU Member States: The Early Years

Summary:

This study takes stock of the early history of independent fiscal institutions (IFI) in the EU and draws horizontal lessons for the future from the experiences of Member States. First, it briefly recalls how the consensus of the economic literature about well-designed IFIs was reflected in the EU legislation which prompted the spread of IFIs across the whole EU. The paper then describes the significant differences between IFIs across the Member States in terms of the breadth of their mandates, their resources, their visibility in public debates etc. Subsequently, the paper zooms in on two core tasks of IFIs: i) their production or endorsement of the official macroeconomic forecasts used for fiscal planning, and ii) their assessment of national compliance with numerical rules. Qualitative and some tentative quantitative evidence suggest that in the early years of their operation, IFIs have already played a useful role in national budgetary processes, although some common challenges remain present. The discussion paper concludes with a number of potential ideas for strengthening the role of IFIs to the benefit of sound fiscal policymaking. These include, most notably, ensuring more appropriate independence safeguards, improvements in the forecast endorsement process, a more timely and comprehensive monitoring of numerical rules, as well as a broader application of the comply-or-explain principle in relation to IFIs’ assessments.

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