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Debt sustainability and economic convergence of euro-area Member States: Challenges and Solutions

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  • P. Manasse

Abstract

This paper argues that fiscal convergence in the Euro area has been achieved at the expenses of real divergence in unemployment, investment and at, at least temporarily, growth. Statistical and econometric analysis support the view that the current fiscal framework has addressed debt sustainability concerns, but has imparted a pro-cyclical bias, which has contributed to economic divergence. The recent flexibility guidelines are a step in the right direction, but they are unlikely to have sizable effects. A reform of the fiscal framework and a mechanism for an intra-European unemployment insurance scheme is proposed.

Suggested Citation

  • P. Manasse, 2015. "Debt sustainability and economic convergence of euro-area Member States: Challenges and Solutions," Working Papers wp1035, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp1035
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    References listed on IDEAS

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    1. Oya Celasun & Xavier Debrun & Jonathan D. Ostry, 2006. "Primary Surplus Behavior and Risks to Fiscal Sustainability in Emerging Market Countries: A "Fan-Chart" Approach," IMF Staff Papers, Palgrave Macmillan, vol. 53(3), pages 1-3.
    2. Eugen Tereanu & Ms. Anita Tuladhar & Mr. Alejandro Simone, 2014. "Structural Balance Targeting and Output Gap Uncertainty," IMF Working Papers 2014/107, International Monetary Fund.
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    Cited by:

    1. Schilirò, Daniele, 2016. "Rules, Imbalances and Growth in the Eurozone," MPRA Paper 75641, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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