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Addressing the EU’s fiscal dilemma: From ex-post transfers to ex-ante resilience

Author

Listed:
  • Georg Kirchsteiger
  • Martin Larch

Abstract

The EU’s fiscal governance framework was built to contribute to overall macroeconomic stability through compliance with fiscal rules and the commitment not to bail-out countries in trouble. Yet successive crises have revealed vulnerabilities under systemic stress: countries with a propensity to run deficits push frugal ones into ex-post bail-out arrangements to avert collapse, thus undermining the ex-ante credibility of the framework. The absence of a permanent, preventive instrument forces the Union to oscillate between leniency and emergency intervention. A permanent RRF-like mechanism - linking EU funds to reform and investment projects - offers an incentive compatible solution and a possible bridge to a larger EU budget.

Suggested Citation

  • Georg Kirchsteiger & Martin Larch, 2026. "Addressing the EU’s fiscal dilemma: From ex-post transfers to ex-ante resilience," Working Papers ECARES 2026-26, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/409827
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    More about this item

    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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