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The reformed EU fiscal framework – potential macroeconomic implications for the euro area

Author

Listed:
  • Bouabdallah, Othman
  • Checherita-Westphal, Cristina
  • Hauptmeier, Sebastian
  • Muggenthaler, Philip

Abstract

Following the European Commission’s legislative proposals of April 2023, the ECOFIN Council reached an agreement on the reform of the fiscal rules underpinning the EU Stability and Growth Pact (SGP) on 20 December 2023. This box provides a preliminary assessment of the potential macroeconomic effects of the EU fiscal framework reform over the horizon of the March 2024 ECB staff macroeconomic projections for the euro area. In light of the agreement reached by the EU co-legislators on 10 February 2024, the box concludes that adhering to the requirements under the revised fiscal framework would imply some additional fiscal tightening over 2025-26, which, in turn, may entail some downside risks to growth, although these are rather small. The inflation impact is assessed as being limited. JEL Classification: E62, O40, E31

Suggested Citation

  • Bouabdallah, Othman & Checherita-Westphal, Cristina & Hauptmeier, Sebastian & Muggenthaler, Philip, 2024. "The reformed EU fiscal framework – potential macroeconomic implications for the euro area," Economic Bulletin Boxes, European Central Bank, vol. 3.
    • Handle: RePEc:ecb:ecbbox:2024:0003:8
    Note: 2679249
    as

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    More about this item

    Keywords

    Fiscal policy; growth; inflation;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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