Rules or capacity for the EU’s fiscal future? From Werner and McDougall to the present
Journal of Public Budgeting, Accounting & Financial Management
ISSN: 1096-3367
Article publication date: 18 December 2023
Issue publication date: 11 April 2024
Abstract
Purpose
The COVID19 crisis has thrown wide open the debate on Europe’s Economic and Monetary Union’s (EMU) future. Next Generation EU (NGEU) has broken the stalemate over a central fiscal capacity. The open question is whether NGEU is a one-off or a first step. The suspension of the Stability and Growth Pact has given new urgency to the debate on reforming EMU’s fiscal rules.
Design/methodology/approach
There is no debate as yet about how these two prospects relate to each other. This paper argues that a permanent fiscal capacity and revised rules should be seen as alternatives.
Findings
This study makes two claims: first, a fiscal capacity renders a reformed pact unnecessary and second, that is an optimal solution politically. A fiscal capacity would provide an efficient asymmetric shock absorber and therefore reduce the need for pre-emptive action against negative cross-border externalities. It would also provide an abundant supply of an EU-wide safe asset around which to structure the EU’s financial system, thus rendering unnecessary the backstopping of member states' debts.
Originality/value
This would restore democratic accountability while eliminating moral hazard and enforcement problems.
Keywords
Acknowledgements
Since submission of this article, the following author have updated their affiliations: Christakis Georgiou is at the Sciences Po Grenoble, Grenoble, France.
Citation
Georgiou, C. (2024), "Rules or capacity for the EU’s fiscal future? From Werner and McDougall to the present", Journal of Public Budgeting, Accounting & Financial Management, Vol. 36 No. 2, pp. 200-216. https://doi.org/10.1108/JPBAFM-08-2023-0151
Publisher
:Emerald Publishing Limited
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