Aufsatz in Zeitschrift

The Reform of the EU Economic Governance Framework, Market Discipline and the Role of the ECB

Clemens Fuest
CESifo, Munich, 2023

EconPol Forum 24 (4), 05-10
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  • Experience with European fiscal rules has shown that European rules cannot prevent member states from accumulating high debt levels if they want to
  • The fact that the ECB increasingly positions itself as a fiscal bailout mechanism implies that the risk of short-term fiscal crises due to a collapse of confidence in capital market declines. But this comes at the cost of further weakening incentives for fiscal discipline
  • A reform of economic governance should place emphasis on enhancing fiscal discipline and responsibility
  • The proposal that an excessive deficit procedure will be opened by default if countries deviate from their agreed fiscal adjustment paths may improve discipline
  • In contrast, the idea to allow countries to incur more debt if their policies are aligned with EU political priorities will weaken fiscal discipline

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