Economic governance in the next EU legislature. What agenda for fiscal and monetary policy?

The last fifteen years have seen a succession of crises which have put European integration to the test and polarized the political landscape.After the serious errors made in managing the sovereign debt crisis, the widening divergences between European countries, and the sluggish growth that followed, European decision-makers reacted with altogether greater efficiency to the crisis born of the pandemic. At the cost of mounting debt, national fiscal policies supported jobs, household incomes and corporate solvency by providing aid during the periods of forced inactivity. In the meantime, the European Central Bank (ECB) set up securities purchase programmes and provided backing for the banking sector to alleviate pressure on the financial and sovereign debt markets. Finally, the European Commission arranged soft loan programmes to support government spending that targeted the sectors hit hardest by the pandemic (health care and the labour market). These efforts were crowned with success and largely explain the economic rebound following the lockdowns.The responsiveness of the European authorities, surprising given the inertia shown during previous crises, carried over into the medium-and long-term orientation embodied both in the Next Generation EU (NGEU) programme of investment in the ecological and digital transitions as well as in the tool put in place by the ECB to avoid widening spreads and protect member states' public finances, the Transmission Protection Instrument (TPI).This Policy brief takes a broadly positive view of the policies and institutional developments implemented over the past four years: the European Union (EU) and the eurozone have managed to bounce back from the crisis and embark on a long-term investment programme which, despite its inevitable shortcomings, is succeeding in meeting its goals. But the EU has also had its share of failures. The disappointment of the European Stability Mechanism's (ESM) dedicated credit line for healthcare expenditure demonstrates the need to reorganize the assistance provided by European institutions to member states. Above all, resistance to a perennization of the NGEU programme or, more generally, to the creation of borrowing and spending capacity at European level, coupled with a very disappointing reform of the Stability and Growth Pact, continues to pose the problem of creating the fiscal space to meet the EU's future needs, whether in terms of industrial and transition policies, macroeconomic stabilization, or the provision of global public goods such as health care and education. Finally, the nature of the inflationary shock has shown that macroeconomic and structural policies need to be coordinated to cope with multidimensional shocks, which raises the question of the anachronistic nature of the ECB's single mandate on price stability