Research Briefing | Jan 25, 2022

EU fiscal rules: we expect reforms but no paradigm shift

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.
Back to Resource Hub

Related research

Post

Finland’s growth forecast cut amid weak confidence and soaring inflation

We have lowered our 2022 GDP growth forecast for Finland to 1.5% from 1.7% last month, as weakening confidence further dampens the outlook. We expect inflation to peak higher with a greater passthrough to core prices, squeezing real incomes and denting consumption. Russia has accounted for almost 10% of Finland's goods trade, among the highest in Europe.

Find Out More

Post

Why we see eurozone inflation slowing sharply next year

We have revised our 2022 eurozone inflation forecasts sharply higher, to 6.0%, since the start of the Ukraine war, as energy and food prices began to soar and new supply bottlenecks emerged. That said, we still see inflation decelerating sharply to 1.3% in 2023, putting us below consensus. While we recognise significant risks to our views, inflation should slow to below 2% in H2 2023.

Find Out More