Article in Journal

Solving the Enforcement Dilemma of the EU Fiscal Rules

Paul Dermine, Martin Larch
CESifo, Munich, 2023

EconPol Forum 24 (4), 26-29
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  • To ensure a smooth functioning of the Economic and Monetary Union, the Stability and Growth Pact defines limits on national fiscal policies and encompasses the possibility to impose sanctions
  • This short piece explores the much under-examined issue of enforcement of the EU fiscal rules
  • In the ongoing reform debate, a more consistent recourse to financial sanctions under the Stability and Growth Pact is presented as a counterweight to more flexible and tailor-made rules
  • At the same time, in light of past experience and in the absence of concrete changes to EU governance, many observers take a rather negative stance on the enforceability of EU fiscal rules
  • We clarify a number of crucial concepts with the aim of debunking the politically appealing but risky view that in the EU imposing sanctions on sovereigns is nearly impossible

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