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Reforming Fiscal Governance in the EU: Operational Issues and Options

Location: IMF Offices in Europe, Paris

April 18, 2014

The IMF Fiscal Affairs Department and Offices in Europe are organizing a workshop on “Reforming Fiscal Governance in the EU: Operational Issues and Options.”

A striking feature of recent fiscal governance reforms in the European Union is that they cover both the Union-wide rules-based framework and the national fiscal frameworks. The latter are now subject to a number of requirements in terms of the design and enforcement of fiscal rules—a structural budget balance budget rule equipped with an automatic correction mechanism—and the role of independent institutions. After taking stock of the reforms at the EU level, the workshop will discuss the operational issues and available options for member states to design and implement national frameworks consistent with the new requirements. The workshop will offer a forum for policymakers and leading scholars to discuss country-specific challenges and sensible ways to address them. Four sessions will focus on (i) assessing the latest fiscal governance reforms at the EU level, (ii) the operational challenges of implementing a fiscal rule defined in structural terms, (iii) the role of expenditure rules in the new fiscal frameworks, and (iv) the issues related to the implementation of a rules-based fiscal framework in highly decentralized or federal states.

Participation to the conference is by invitation only.

April 18, 2014

9:00-9:15 a.m.

Introductory remarks

M. Guerguil, Deputy Director, Fiscal Affairs Department, IMF

9:15-10:45 a.m.

Fiscal Governance Reforms in the EU—Taking Stock

How does the amended rules-based framework at the EU level fill the gaps revealed by the crisis? What is the rationale for the reforms of national fiscal frameworks mandated by EU law? What are the “reform gaps” at the national level? What is the room for tailoring national frameworks to country-specific circumstances? What is the risk of “rules overhang” (too many rules, possibly inconsistent)? Is the required harmonization of fiscal frameworks adequately tuned to foster compliance with the supranational rules? What coordination mechanism can mitigate the risk of conflicts between independent monitoring and EC surveillance?

Chair: M. Guerguil, Deputy Director, Fiscal Affairs Department, IMF

C. Wyplosz, Professor, Graduate Institute, Geneva

J. Pisani-Ferry, Commissioner General for Strategy and Planning, France

Discussant:T. Wu, Senior Economist, European Department, IMF

10:45-11:00 a.m.

Coffee break

11:00 a.m.-12:30 p.m.

The Structural Balance—Concept and Implementation

What are the key features of an adequate conceptual framework for estimating structural budget balances (SBBs)? To what extent can the bias in real-time output gaps be reflected in assessments of compliance with the rule? How can asset price cycles be measured and incorporated in SBBs? What degree of harmonization can be realistically and productively achieved in SBB methodologies among heterogeneous economies? What are the lessons from countries implementing an SBB rule?

Chair: X. Debrun , Deputy Division Chief, Fiscal Affairs Department, IMF

N. Carnot , Advisor, DG ECFIN, European Commission

T. Mattina , Deputy Division Chief, Fiscal Affairs Department, IMF

Discussant:A. Bénétrix , Professor, Trinity College, Dublin

12:30-1:45 p.m.


Remarks by C. Mumssen, Director, Offices in Europe, IMF

1:45-3:15 p.m.

A Role for Expenditure Rules?

Some countries following structural balance rules found it useful to adopt expenditure rules as a way to set operational budget targets consistent with the structural balance objective. What are the main features of expenditure rules worldwide? Have they effectively promoted better fiscal outcomes? Are there side-effects in terms of expenditure composition and efficiency? What are the lessons from country cases (Sweden, Netherlands)? Should EU “expenditure benchmarks” be emulated at the national level?

Chair: R. Downes , Deputy Head, Public Governance, OECD

W. Suyker , Program Leader, Netherlands Bureau for Economic Policy Analysis

Discussant:X. Debrun, Deputy Division Chief, Fiscal Affairs Department, IMF

3:15-3:30 p.m.

Coffee break

3:30-5:00 p.m.

Rules-based Fiscal Frameworks and Decentralization

EU countries vary greatly in their fiscal decentralization arrangements. What is the experience with coordinating fiscal policy in rules-based fiscal framework (e.g. Austria, Belgium, and Germany)? More specifically, how can countries implement a structural balance rule for the general government when expenditure devolution to sub-national entities is large? What mechanisms can ensure an adequate sharing of the compliance burden?

Chair: T. Mattina , Deputy Division Chief, Fiscal Affairs Department, IMF

G. Steger , Director General, Austrian Supreme Audit Institution

Discussant:G. Langenus , Senior Advisor, National Bank of Belgium

5:00-5:30 p.m

Concluding remarks

M. Guerguil, Deputy Director, Fiscal Affairs Department, IMF