Returning to a “new normal”: revising the EU fiscal rulebook

Abstract:

In marked contrast to the muddled European Union (EU) reaction to the financial crisis and its aftermath, the EU response to the COVID-19 pandemic has been impressively swift and comprehensive. Creating the Recovery and Resilience Facility (RRF) and establishing a coherent framework for its implementation has involved constructive and intense policy dialogues between the European Commission and EU member states, leading to improved mutual understanding of challenges, while building trust and ownership.

This bodes well for the debate about the reform of the EU`s fiscal rules. Four new characteristics of the current economic environment call for a reconsideration of the Maastricht rules: significantly higher values of public debt ratios, very low or even negative interest rates, limited effectiveness of monetary policy in the vicinity of the effective lower bound, and common debt issuance with the adoption of the RRF.

Against this background, the reform needs to address the key challenges of simultaneously reducing high public debt and ensuring major investments in green transition and digital transformation, while simplifying the fiscal rulebook.

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News

Wiener Zeitung: 02/09/2022: EU fiscal rules: back to a "new normal" (in German) https://www.wienerzeitung.at/meinung/gastkommentare/2137211-EU-Fiskalregeln-Zurueck-zu-einer-neuen-Normalitaet.html

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