Publication

The fiscal governance of the Euro-area is subject to debate and this paper aims to identify key insights and propose potential solutions. It first describes the theoretical rationale for fiscal discipline, then turns to a brief description of the evolution of the EMU’s fiscal institutional framework and afterwards assesses the debate as well as current reform proposals. The upshot of the analysis is that, as some authors have suggested, fiscal governance based on compulsory and automatic rules is unlikely either to lead to sound fiscal policy or to be enforceable in an intergovernmental setting. Therefore a more integrated framework based on permanent institutions rather than rules is proposed and briefly sketched.