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Fiscal rules in the euro area and lessons from other monetary unions

Author

Listed:
  • Leiner-Killinger, Nadine
  • Nerlich, Carolin

Abstract

This article compares the fiscal rule framework in the euro area with the frameworks in the fiscally more integrated United States and Switzerland, with the aim of drawing lessons for ways in which fiscal rules could be reformed in European Economic and Monetary Union (EMU). Both the United States and Switzerland have a history of balanced budget rules that help stabilise government debt in individual states/cantons at moderate and broadly comparable levels. The recent shift towards balanced budget rules in the euro area is an important achievement in this direction, and has contributed to better average underlying budgetary positions. Still, the fiscal rule framework needs to be rendered more effective in reducing high levels of government debt and their dispersion across the euro area. Reducing the heterogeneity of government debt positions is also an important prerequisite for setting up a well-governed common macroeconomic stabilisation function at the centre of EMU in case of deep economic crises. This in turn would help to contain the procyclicality of fiscal rules at the country level. JEL Classification: H61, H74, H77

Suggested Citation

  • Leiner-Killinger, Nadine & Nerlich, Carolin, 2019. "Fiscal rules in the euro area and lessons from other monetary unions," Economic Bulletin Articles, European Central Bank, vol. 3.
    • Handle: RePEc:ecb:ecbart:2019:0003:2
    Note: 564550
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    File URL: https://www.ecb.europa.eu//pub/economic-bulletin/articles/2019/html/ecb.ebart201903_02~e835720b96.en.html
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    Citations

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    Cited by:

    1. Pablo Burriel & Panagiotis Chronis & Maximilian Freier & Sebastian Hauptmeier & Lukas Reiss & Dan Stegarescu & Stefan Van Parys, 2020. "A fiscal capacity for the euro area: lessons from existing fiscal-federal systems," Occasional Papers 2009, Banco de España.
    2. MATEI, Adrian Ducu, 2019. "Reducing Tax Evasion By Increasing The Quality Of Fiscal Information," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 7(1), pages 36-41, October.
    3. Benalal, Nicholai & Freier, Maximilian & Melyn, Wim & Van Parys, Stefan & Reiss, Lukas, 2022. "Towards a single fiscal performance indicator," Occasional Paper Series 288, European Central Bank.
    4. Căpraru, Bogdan & Georgescu, George & Sprincean, Nicu, 2022. "Do independent fiscal institutions cause better fiscal outcomes in the European Union?," Economic Systems, Elsevier, vol. 46(2).
    5. Christine Olivia Strong, 2023. "The impact of fiscal rules on government debt: evidence from the CFA zone," Empirical Economics, Springer, vol. 65(5), pages 2357-2391, November.
    6. Rostagno, Massimo & Altavilla, Carlo & Carboni, Giacomo & Lemke, Wolfgang & Motto, Roberto & Saint Guilhem, Arthur & Yiangou, Jonathan, 2019. "A tale of two decades: the ECB’s monetary policy at 20," Working Paper Series 2346, European Central Bank.

    More about this item

    Keywords

    fiscal federalism; National fiscal rules; Stability and Growth Pact;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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