Vox
March 1, 2012
Eurozone countries have recently agreed to adopt a ‘golden rule’ for fiscal policy, forcing governments to be stricter about balancing their books. This column compares the golden rule to existing EU fiscal policies. It argues that the successful implementation of the golden rule would overturn much of the existing economic governance in the Eurozone to become the main determinant of fiscal discipline.
Achieving more fiscal discipline has been at the top of the political agenda ever since financial markets started to question the sustainability of public finances in the Eurozone. In an attempt to show the Eurozone’s resolve, EU leaders have agreed to a new intergovernmental treaty – the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union.
The Treaty does not contain that many new elements. Nonetheless, its obligation for Eurozone countries to adopt a so-called golden rule in their national legislation is likely to have a very significant impact. As Whelan (2012) argues on this site, the golden rule would transform Eurozone economic governance. This column looks at how the new and old rules compare under various macroeconomic conditions (mostly initial debt ratios and GDP growth).
More
No comments:
Post a Comment