EU fiscal rules: we expect reforms but no paradigm shift
We expect important changes to the EU’s fiscal governance framework, but no paradigm shift. Specifically, green and digital public investments will receive special treatment; the debt anchor and pace of adjustment will better reflect new realities; and emphasis will shift to checking expenditure growth. Thus, a fiscal cliff in 2023, when the rules are set to kick back in, will be avoided.
What you will learn:
- There is consensus among economists that the existing rules are not fit for purpose.
- But even if certain public investments do receive special treatment, we don’t foresee a massive debt-funded public investment spree.
- Credible fiscal rules with broad compliance and enforcement are key in building trust among eurozone members and unlocking progress in other integration projects, such as completing the banking union, repurposing and making permanent the Recovery Fund, or a eurozone fiscal union.
Tags:
Related research
Post
Nowcast shows wage growth slowing sharply
Our sentiment data, developed with Penta, suggests that UK private sector wage growth slowed sharply in March and early-April. If official data mirrors our sentiment indicator, it should keep the Monetary Policy Committee on track to cut interest rates in the summer.
Find Out More
Post
The euro and depreciation – shake, shake it off
Our new forecast assumes a slower euro appreciation against the dollar over the coming years than we previously anticipated. Relative productivity, terms of trade, and the current account will likely be less supportive of the euro than we thought. In addition, a stronger stock market than initially envisaged will attract more financial flows into the US than we had expected.
Find Out More