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Fiscal Rules in the European Union: Less Is More

Author

Listed:
  • Bogdan Căpraru
  • Anastasios Pappas
  • Nicu Sprincean

Abstract

In this article, we examine the non‐linear relationship between the number of fiscal rules in place and compliance with the European Union's (EU) numerical fiscal targets included in the Stability and Growth Pact (SGP). Using a sample composed of 27 EU Member States for a period spanning 2000 to 2021, we document that countries' compliance with fiscal rules is positively associated with the number of numerical fiscal targets. However, this association only holds up to a specific threshold. Once this threshold is achieved, the relationship becomes negative, implying that the multiplication of numerical fiscal rules may undermine compliance, thereby reducing their effectiveness. In addition, we find that general elections and frequent changes in government reduce compliance, whereas economic adjustment programmes contribute positively to countries' compliance with fiscal targets. The findings bear critical policy implications against the backdrop of the current review of the European fiscal framework.

Suggested Citation

  • Bogdan Căpraru & Anastasios Pappas & Nicu Sprincean, 2025. "Fiscal Rules in the European Union: Less Is More," Journal of Common Market Studies, Wiley Blackwell, vol. 63(1), pages 320-334, January.
    • Handle: RePEc:bla:jcmkts:v:63:y:2025:i:1:p:320-334
    DOI: 10.1111/jcms.13628
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