The EU Fiscal Rules

doi:10.1017/9781009364706.021

17 - The EU Fiscal Rules

Principle, Policy, and Reform Prospects

from Part III - The Economic and Fiscal Dimensions

Published online by Cambridge University Press: 28 September 2023

Menelaos Markakis

Edited by

Dariusz Adamski ,

Fabian Amtenbrink and

Jakob de Haan

Show author details

Dariusz Adamski: Affiliation:
University of Wroclaw
Fabian Amtenbrink: Affiliation:
Erasmus Universiteit Rotterdam
Jakob de Haan: Affiliation:
University of Groningen

Book contents

Get access

Summary

The future direction of the Economic and Monetary Union (EMU) has been the subject of heated debate. Among those features pertaining to the reform of EMU, this chapter focuses on the EU fiscal rules. The discussion begins with an overview of the existing EU framework for fiscal and economic governance, its economic rationale, and the reforms adopted in response to the eurozone crisis. This is followed by analysis of the preventive and corrective arms of the Stability and Growth Pact, on which this contribution principally focuses. We then turn to consider the criticism to which the existing EU framework for fiscal coordination and surveillance has been subjected. The focus then shifts to the various proposals on the future evolution of the EU’s fiscal and economic governance framework. The penultimate section provides a legal assessment of the proposed reforms, thereby setting out what would be required, from a legal perspective, in order to amend, replace, or repeal the various aspects of the existing framework. The final section argues that the (potential) reform of the EU fiscal rules is but a key piece of the broader puzzle of EMU reform, and that therefore we should not neglect its other aspects.

Information

Type: Chapter
Information: The Cambridge Handbook of European Monetary, Economic and Financial Integration , pp. 305 - 331

DOI: https://doi.org/10.1017/9781009364706.021 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2023

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Book purchase

Temporarily unavailable

References

Adamski, D. (2018). Redefining European Economic Integration. Cambridge: Cambridge University Press.Google Scholar

Amtenbrink, F. (2014). General report. In Neergaard, U., Jacqueson, C., and Hartig Danielsen, J. (eds.), The Economic and Monetary Union: Constitutional and Institutional Aspects of the Economic Governance within the EU. The XXVI FIDE Congress in Copenhagen 2014, Congress Publications Vol. 1. Copenhagen: Djøf Publishing, pp. 73–178.Google Scholar

Amtenbrink, F., and Markakis, M. (in press). Never waste a good crisis: On the emergence of an EU fiscal capacity. In Hinarejos, A. and Schütze, R. (eds.), EU Fiscal Federalism: Past, Present, Future. Oxford: Oxford University Press.Google Scholar

Amtenbrink, F., and Repasi, R. (2017). Compliance and enforcement in economic policy coordination in EMU. In Jakab, A. and Kochenov, D. (eds.), The Enforcement of EU Law and Values: Ensuring Member States’ Compliance. Oxford: Oxford University Press, pp. 145–181.Google Scholar

Bénassy-Quéré, A., and Wolff, G. (2020). How has the macroeconomic imbalances procedure worked in practice to improve the resilience of the euro area? (Study for the European Parliament’s Committee on Economic and Monetary Affairs). www.europarl.europa.eu/RegData/etudes/STUD/2020/645710/IPOL_STU(2020)645710_EN.pdf Google Scholar

Bénassy-Quéré, A., Brunnermeier, M., Enderlein, H., Farhi, E., Fratzscher, M., Fuest, C., Gourinchas, P.-O., Martin, P., Pisani-Ferry, J., Rey, H., Schnabel, I., Véron, N., Weder di Mauro, B., and Zettelmeyer, J. (2018). Reconciling risk sharing with market discipline: A constructive approach to euro area reform (Centre for Economic Policy Research Policy Insight No. 91). https://cepr.org/publications/policy-insight-91-reconciling-risk-sharing-market-discipline-constructive-approach Google Scholar

Blanchard, O., Leandro, Á., and Zettelmeyer, J. (2021). Redesigning EU fiscal rules: From rules to standards (Peterson Institute for International Economics Working Paper No. 21-1). www.piie.com/publications/working-papers/redesigning-eu-fiscal-rules-rules-standards Google Scholar

Brunnermeir, M. K., James, H., and Landau, J.-P. (2016). The Euro and the Battle of Ideas. Princeton, NJ: Princeton University Press.Google Scholar

CEPS Think Tank. (2021). CEPS/Intereconomics conference: Redesigning EU Fiscal Rules after COVID-19 [Video file]. 30 November. www.youtube.com/watch?v=Rj7mE-GIdAM&ab_channel=CEPSThinkTank Google Scholar

Council of the European Union (2016). Improving the assessment of effective action in the context of the excessive deficit procedure – A specification of the methodology (Opinion of the Economic and Financial Committee). https://data.consilium.europa.eu/doc/document/ST-14813-2016-INIT/en/pdf Google Scholar

Council of the European Union (2017). Revised specifications on the implementation of the Stability and Growth Pact and Guidelines on the format and content of Stability and Convergence Programmes (Code of Conduct of the Stability and Growth Pact). https://data.consilium.europa.eu/doc/document/ST-9344-2017-INIT/en/pdf Google Scholar

Council of the European Union (2020). Statement of EU Ministers of Finance on the Stability and Growth Pact in light of the COVID-19 crisis. 23 March. www.consilium.europa.eu/en/press/press-releases/2020/03/23/statement-of-eu-ministers-of-finance-on-the-stability-and-growth-pact-in-light-of-the-covid-19-crisis/Google Scholar

Craig, P., and Markakis, M. (2020). EMU reform. In Amtenbrink, F. and Herrmann, C. (eds.), assisted by R. Repasi, The EU Law of Economic and Monetary Union. Oxford: Oxford University Press, pp. 1400–1448.Google Scholar

Dermine, P. (2020). The EU’s response to the COVID-19 crisis and the trajectory of fiscal integration in Europe: Between continuity and rupture. Legal Issues of Economic Integration 47(4), 337–358.Google Scholar

Dermine, P. (2022a). Fiscal surveillance and coordination in post-pandemic times – between uncertainty and opportunity. www.ecb.europa.eu/pub/pdf/other/ecb.ecblegalconferenceproceedings202204~c2e5739756.en.pdf Google Scholar

Dermine, P. (2022b). The New Economic Governance of the Eurozone: A Rule of Law Analysis. Cambridge: Cambridge University Press.Google Scholar

Dullien, S., Paetz, C., Repasi, R., Watt, A., and Watzka, S. (2021). Between high ambition and pragmatism: Proposals for a reform of fiscal rules without treaty change (Study for the European Economic and Social Committee). www.eesc.europa.eu/fi/our-work/publications-other-work/publications/between-high-ambition-and-pragmatism-proposals-reform-fiscal-rules-without-treaty-change Google Scholar

EU Independent Fiscal Institutions (2021). EU Fiscal and Economic Governance Review: A contribution from the Network of Independent EU Fiscal Institutions. www.euifis.eu/publications/6 Google Scholar

European Commission (2016). Stability and Growth Pact: Council adopts recommendations on Spain and Portugal. https://ec.europa.eu/commission/presscorner/detail/en/IP_16_2761 Google Scholar

European Commission (2017). Proposal for a Council Directive laying down provisions for strengthening fiscal responsibility and the medium-term budgetary orientation in the Member States (COM(2017) 824 final). https://ec.europa.eu/info/sites/default/files/economy-finance/com_824_0.pdf Google Scholar

European Commission (2019). Vade Mecum on the Stability & Growth Pact – 2019 Edition (Institutional Paper No. 101). https://economy-finance.ec.europa.eu/publications/vade-mecum-stability-and-growth-pact-2019-edition_en Google Scholar

European Commission (2020). Economic governance review: Report on the application of Regulations (EU) No 1173/2011, 1174/2011, 1175/2011, 1176/2011, 1177/2011, 472/2013 and 473/2013 and on the suitability of Council Directive 2011/85/EU (COM(2020) 55 final). https://ec.europa.eu/info/sites/default/files/economy-finance/com_2020_55_en.pdf Google Scholar

European Commission (2021). Questions and answers: Commission relaunches the review of EU economic governance. https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_5322 Google Scholar

European Commission (2022a). Commission presents fiscal policy guidance for 2023. https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1476 Google Scholar

European Commission (2022b). Economic Governance Review – Summary report of the public consultation. https://ec.europa.eu/info/files/economic-governance-review-summary-report-public-consultation_en Google Scholar

European Commission (n.d.a). Significant Deviation Procedure. https://economy-finance.ec.europa.eu/economic-and-fiscal-governance/stability-and-growth-pact/preventive-arm/significant-deviation-procedure_en Google Scholar

European Commission (n.d.b). Stability and Growth Pact. https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-economic-governance-monitoring-prevention-correction/stability-and-growth-pact_en Google Scholar

European Court of Auditors (2016). Further improvements needed to ensure effective implementation of the Excessive Deficit Procedure (Special Report No. 10/2016). www.eca.europa.eu/Lists/ECADocuments/SR16_10/SR_EDP_EN.pdf Google Scholar

European Court of Auditors (2018a). Audit of the Macroeconomic Imbalance Procedure (MIP) (Special Report No. 03/2018). www.eca.europa.eu/Lists/ECADocuments/SR18_03/SR_MIP_EN.pdf Google Scholar

European Court of Auditors (2018b). Is the main objective of the preventive arm of the Stability and Growth Pact delivered? (Special Report No. 18/2018). www.eca.europa.eu/Lists/ECADocuments/SR18_18/SR_EUROPEAN_SEMESTER_EN.pdf Google Scholar

European Court of Auditors (2019). EU requirements for national budgetary frameworks: need to further strengthen them and to better monitor their application (Special Report No. 22/2019). www.eca.europa.eu/Lists/ECADocuments/SR19_22/SR_Fiscal_Stability_EN.pdf Google Scholar

European Fiscal Board (2018). Annual Report 2018. https://ec.europa.eu/info/sites/default/files/2018-efb-annual-report_en.pdf Google Scholar

European Fiscal Board (2019a). Assessment of EU fiscal rules with a focus on the six and two-pack legislation. https://ec.europa.eu/info/sites/default/files/2019-09-10-assessment-of-eu-fiscal-rules_en.pdf Google Scholar

European Fiscal Board (2019b). Annual Report 2019. https://ec.europa.eu/info/sites/default/files/2019-efb-annual-report_en.pdf Google Scholar

European Fiscal Board (2020). Annual Report 2020. https://ec.europa.eu/info/sites/default/files/efb_annual_report_2020_en_1.pdf Google Scholar

European Fiscal Board (2021). Annual Report 2021. https://ec.europa.eu/info/sites/default/files/annual_report_2021_efb_en_1.pdf Google Scholar

European Stability Mechanism. (2021). EU fiscal rules: Reform considerations. ESM Discussion Paper No. 17. www.esm.europa.eu/publications/eu-fiscal-rules-reform-considerations Google Scholar

European Stability Mechanism (2022). ESM conference on deepening EMU. Summary of proceedings. www.esm.europa.eu/system/files/document/2022-02/2022-01-24%20ESM%20conference%20summary%20of%20proceedings.pdf Google Scholar

Federal Ministry for Economic Affairs and Climate Action (2022). Proposed principles to guide the German government in deliberations on the reform of EU fiscal rules. www.bmwk.de/Redaktion/EN/Downloads/P/proposed-principles-to-guide-the-german-government-in-deliberations-on-the-reform-of-eu-fiscal-rules.html Google Scholar

Flynn, L. (2020). Non-fiscal surveillance of the Member States. In Amtenbrink, F. and Herrmann, C. (eds.), assisted by R. Repasi, The EU Law of Economic and Monetary Union. Oxford: Oxford University Press, pp. 850–877.Google Scholar

Government of the Netherlands (2022). Spain and The Netherlands call for a renewed EU Fiscal Framework fit for current and future challenges. www.government.nl/latest/news/2022/04/04/spain-and-the-netherlands-call-for-a-renewed-eu-fiscal-framework-fit-for-current-and-future-challenges Google Scholar

Hagelstam, K., and De Lemos Peixoto, S. (2022). Implementation of the Stability and Growth Pact under pandemic times. European Parliament, Economic Governance Support Unit. www.europarl.europa.eu/RegData/etudes/IDAN/2022/699510/IPOL_IDA(2022)699510_EN.pdfGoogle Scholar

Hinarejos, A. (2020a). Economic and Monetary Union. In Barnard, C. and Peers, S. (eds.), European Union Law, 3rd ed. Oxford: Oxford University Press, pp. 583–611.Google Scholar

Hinarejos, A. (2020b). The legality of responses to the crisis. In Amtenbrink, F. and Herrmann, C. (eds.), assisted by R. Repasi, The EU Law of Economic and Monetary Union. Oxford: Oxford University Press, pp. 1363–1399.Google Scholar

Hinarejos, A. (2021). Economic governance and the pandemic: A year on. European Law Review 46(2), 127–128.Google Scholar

Hinarejos, A., and Schütze, R. (eds.) (in press). EU Fiscal Federalism: Past, Present, Future. Oxford: Oxford University Press.Google Scholar

Jahan, S., and Saber Mahmud, A. (2013). What is the output gap? Finance & Development 50(3), 38–39.Google Scholar

Keppenne, J.-P. (2014). Institutional report. In Neergaard, U., Jacqueson, C., and Hartig Danielsen, J. (eds.), The Economic and Monetary Union: Constitutional and Institutional Aspects of the Economic Governance within the EU. The XXVI FIDE Congress in Copenhagen 2014, Congress Publications Vol. 1. Copenhagen: Djøf Publishing, pp. 179–257.Google Scholar

Keppenne, J.-P. (2020a). Economic policy coordination: Foundations, structures, and objectives. In Amtenbrink, F. and Herrmann, C. (eds.), assisted by R. Repasi, The EU Law of Economic and Monetary Union. Oxford: Oxford University Press, pp. 787–812.Google Scholar

Keppenne, J.-P. (2020b). EU fiscal governance on the Member States: The Stability and Growth Pact and beyond. In Amtenbrink, F. and Herrmann, C. (eds.), assisted by R. Repasi, The EU Law of Economic and Monetary Union. Oxford: Oxford University Press, pp. 813–849.Google Scholar

Kopits, G., and Symansky, S. A. (1998). Fiscal policy rules. IMF Occasional Paper No. 1998/011. www.imf.org/en/Publications/Occasional-Papers/Issues/2016/12/30/Fiscal-Policy-Rules-2608 Google Scholar

Maduro, M., Martin, P., Piris, J.-C., Pisani-Ferry, J., Reichlin, L., Steinbach, A., and Weder di Mauro, B. (2021). Revisiting the EU framework: Economic necessities and legal options. Centre for Economic Policy Research Policy Insight No. 114. https://cepr.org/active/publications/policy_insights/viewpi.php?pino=114 Google Scholar

Markakis, M. (2020a). Accountability in the Economic and Monetary Union: Foundations, Policy, and Governance. Oxford: Oxford University Press.Google Scholar

Markakis, M. (2020b). The reform of the European Stability Mechanism: Process, substance, and the pandemic. Legal Issues of Economic Integration 47(4), 359–384.Google Scholar

Martin, P., Pisani-Ferry, J., and Ragot, X. (2021). Reforming the European Fiscal Framework (Les notes du conseil d’analyse économique, no. 63, April 2021). www.cae-eco.fr/en/pour-une-refonte-du-cadre-budgetaire-europeen Google Scholar

Thirion, G. (2017). European Fiscal Union: Economic rationale and design challenges. CEPS Working Document No. 2017/01. www.ceps.eu/ceps-publications/european-fiscal-union-economic-rationale-and-design-challenges/Google Scholar

Vallée, S. (2022). A German Proposal That May Finally Break the EU Fiscal Rules Stalemate. https://dgap.org/en/research/publications/german-proposal-may-finally-break-eu-fiscal-rules-stalemate.Google Scholar

Council Regulation (EC) 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies [1997] OJ L209/1.Google Scholar

Council Regulation (EC) 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure [1997] OJ L209/6.Google Scholar

Resolution of the European Council on the Stability and Growth Pact Amsterdam, 17 June 1997 [1997] OJ C236/1.Google Scholar

Regulation (EU) 1173/2011 of the European Parliament and of the Council of 16 November 2011 on the effective enforcement of budgetary surveillance in the euro area [2011] OJ L306/1.Google Scholar

Regulation (EU) 1174/2011 of the European Parliament and of the Council of 16 November 2011 on enforcement measures to correct excessive macroeconomic imbalances in the euro area [2011] OJ L306/8.Google Scholar

Regulation (EU) 1175/2011 of the European Parliament and of the Council of 16 November 2011 amending Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies [2011] OJ L306/12.Google Scholar

Regulation (EU) 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances [2011] OJ L306/25.Google Scholar

Council Regulation (EU) 1177/2011 of 8 November 2011 amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure [2011] OJ L306/33.Google Scholar

Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States [2011] OJ L306/41.Google Scholar

Regulation (EU) 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability [2013] OJ L140/1.Google Scholar

Regulation (EU) 473/2013 of the European Parliament and of the Council of 21 May 2013 on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area [2013] OJ L140/11.Google Scholar

Communication from the Commission, Making the best use of the flexibility within the existing rules of the Stability and Growth Pact. COM(2015) 12 final.Google Scholar

Communication from the Commission to the Council on the activation of the general escape clause of the Stability and Growth Pact. COM(2020) 123 final.Google Scholar

European Parliament resolution of 24 June 2015 on the review of the economic governance framework: stocktaking and challenges (2014/2145(INI)) [2016] OJ C407/86.Google Scholar

European Parliament resolution of 8 July 2021 on the review of the macroeconomic legislative framework for a better impact on Europe’s real economy and improved transparency of decision-making and democratic accountability (2020/2075(INI)) [2022] OJ C99/191.Google Scholar

Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:42012A0302(01)&from=EN Google Scholar

Case C-27/04 (Full Court), Commission of the European Communities v. Council of the European Union, EU:C:2004:436.Google Scholar

Case C-370/12 (Full Court), Thomas Pringle v. Government of Ireland and Others, EU:C:2012:756 .Google Scholar

Accessibility standard: Unknown

Why this information is here

This section outlines the accessibility features of this content - including support for screen readers, full keyboard navigation and high-contrast display options. This may not be relevant for you.

Accessibility Information

Accessibility compliance for the HTML of this chapter is currently unknown and may be updated in the future.