Institutional challenges and alternatives: Revision of fiscal rules in the EU

Please cite the paper as:
Mogens Ove Madsen, (2018), Institutional challenges and alternatives: Revision of fiscal rules in the EU, World Economics Association (WEA) Conferences, No. 2 2018, The 2008 Economic Crisis Ten Years On, 15th October to 30th November, 2018

This paper has been included in the publication
“The 2008 Crisis Ten Years On: in Retrospect, Context and Prospect Paperback”


Fiscal policy in the EU crisis management has been given an overly restrictive role. Even the fact that the ECB has, at its own discretion, launched a QE policy – to notice after the fiscal tightening – has not had the expected impact on investment activity or inflation rate in Europe. Similarly, public investment has not been used sufficiently as an anti-cyclic instrument. Financial policy must be given a greater role in EU cooperation.

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2 comment

  • Arturo Hermann says:

    I agree with most of your points. In my humble opinion much needs to be reformed at the EU level and Maastricht parameters. The real problem, however, is that the attainment of such parameters is supposed to be realised, by the prevailing neo-liberal stance, through cuts in public spending.
    This is wildly unrealistic as public spending plays a central and irreplaceable role in providing public goods and maintaining effective demand. If this requires higher taxation, this can be realised by taxing more higher incomes and rent, while providing incentives for small and medium enterprises. Hence, I would stand for a smaller public sector’s deficit, also on account of the so-called Haavelmo’s theorem according to which also a balanced public budget has expansionsry effects.

  • Alicia Green says:

    I agree with most of your points. Can you say something more on your conclusions, “As an example public investment could be given a special status and also to elaborate on a proposal that leaves greater degree of fiscal independence to the individual countries combined with a cyclical
    stabilization mechanism at the European level.”?