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Which bite harder: new or old EU fiscal rules? Backcasting Croatian episode under the EDP

Author

Listed:
  • Frane Banić

    (Croatian National Bank, Croatia)

  • Milan Deskar-Škrbić

    (Croatian National Bank, Croatia)

  • Maroje Lang

    (Croatian National Bank, Croatia)

Abstract

The aim of this paper is to explain the main features of the latest reform of the EU fiscal framework and to illustrate the differences between the new and old EU fiscal rules, using Croatia's experience during the Excessive Deficit Procedure (EDP) activated in 2014. Our results suggest that the new rules provide greater flexibility, allow for a longer fiscal adjustment, and mitigate the potential pro-cyclical nature of fiscal consolidation. The main limitation of our analysis are the difficulties related to the construction of a hypothetical scenario that would fully capture the political, economic, and institutional context surrounding the activation of the EDP in Croatia, or assumptions regarding the behaviour of fiscal policymakers in such a scenario. The paper nevertheless contributes to the ongoing debate on the implications of the reform of EU fiscal rules at both academic and policy levels.

Suggested Citation

  • Frane Banić & Milan Deskar-Škrbić & Maroje Lang, 2025. "Which bite harder: new or old EU fiscal rules? Backcasting Croatian episode under the EDP," Surveys 42, The Croatian National Bank, Croatia.
    • Handle: RePEc:hnb:survey:42
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    File URL: https://www.hnb.hr/repec/hnb/survey/pdf/s-042.pdf
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    References listed on IDEAS

    as
    1. Heimberger Philipp & Welslau Lennard & Schütz Bernhard & Gechert Sebastian & Guarascio Dario & Zezza Francesco, 2024. "Debt Sustainability Analysis in Reformed EU Fiscal Rules: The Effect of Fiscal Consolidation on Growth and Public Debt Ratios," Intereconomics: Review of European Economic Policy, Sciendo, vol. 59(5), pages 276-283.
    2. Zsolt Darvas & Lennard Welslau & Jeromin Zettelmeyer, 2024. "The implications of the European Union’s new fiscal rules," Bruegel Policy Brief node_10095, Bruegel.
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    4. Florin Bilbiie & Tommaso Monacelli & Roberto Perotti, 2021. "Fiscal Policy in Europe: Controversies over Rules, Mutual Insurance, and Centralization," Journal of Economic Perspectives, American Economic Association, vol. 35(2), pages 77-100, Spring.
    5. Gilles Mourre & Aurélien Poissonnier, 2019. "What Drives the Responsiveness of the Budget Balance to the Business Cycle in EU Countries?," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 54(4), pages 237-249, July.
    6. Kamps, Christophe & Leiner-Killinger, Nadine, 2019. "Taking stock of the functioning of the EU fiscal rules and options for reform," Occasional Paper Series 231, European Central Bank.
    7. Warmedinger, Thomas & Checherita-Westphal, Cristina & Drudi, Francesco & Setzer, Ralph & De Stefani, Roberta & Bouabdallah, Othman & Westphal, Andreas, 2017. "Debt sustainability analysis for euro area sovereigns: a methodological framework," Occasional Paper Series 185, European Central Bank.
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    More about this item

    Keywords

    fiscal policy; fiscal rules; fiscal governance; debt sustainability analysis; Croatia; EDP;
    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
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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