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Rewarding Compliance with Fiscal Rules - A Proposal for Reform of the Stability and Growth Pact

Wolfram F. Richter
CESifo, Munich, 2023

EconPol Forum 24 (4), 30-33
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  • The European Commission has recently published legislative proposals for a reform of the Stability and Growth Pact (SGP). The declared object is to make the economic governance of the EU simpler, improve national ownership, place a greater emphasis on the medium term and strengthen enforcement
  • However, critics doubt that the proposals are suited to enforce member-state fiscal discipline in the original sense of the SGP
  • This paper argues in favor of shifting the competence to impose sanctions in the event of non-compliant behavior of member states from the Community to the intergovernmental level. Rewarding compliance rather than penalizing non-compliance makes the shift possible
  • Such a reform should help to strengthen the accountability for enforcing fiscal discipline, as well as the credibility of sanction threats
  • The reform would bring the governance framework of the SGP closer to that of the European Stability Mechanism (ESM)

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