Reforming Fiscal Governance in the European Union

Author/Editor:

Michal Andrle ; John C Bluedorn ; Luc Eyraud ; Tidiane Kinda ; Petya Koeva Brooks ; Gerd Schwartz ; Anke Weber

Publication Date:

May 21, 2015

Electronic Access:

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Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary:

Successive reforms have brought many positive elements to the European Union’s fiscal framework. But they have also increased its complexity. The current system involves an intricate set of fiscal constraints, which hampers effective monitoring and public communication. Compliance has also been weak. This note discusses medium-term reform options to simplify the framework and improve compliance. Based on model simulations and practical considerations, it argues for moving to a two-pillar approach, with a single fiscal anchor (public debt-to-GDP) and a single operational target (an expenditure growth rule, possibly with an explicit debt correction mechanism) linked to the anchor.

Series:

Staff Discussion Notes No. 15/9

Subject:

English

Publication Date:

May 21, 2015

ISBN/ISSN:

9781498338288/2221-030X

Stock No:

SDNEA201509

Format:

Paper

Pages:

28

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