EU Fiscal Governance & Monetary Union

Europe is facing a whole new set of challenges: The cost of living is rising, war is on our doorstep, and an environmental turnaround is needed. How should the EU framework for economic governance change to make Europe stronger, more sustainable and more resilient? The European Commission has recently developed guidelines for a reformed economic governance framework. In March 2023, the European Council endorsed these guidelines. They aim at strengthening national ownership and facilitating the enforcement of projects. At the same time, they are intended to enable strategic investments and set a framework to reduce the high level of public debt. However, such economic policy coordination efforts at the EU level and the individual governance reform proposals open new debates. To what extent do they correspond to the real needs and interests of the EU? And do they take into account country-specific economic, structural and social problems of the member states?

The EU faces the challenge to combine large and sustained investments to promote the transition towards a green, digital, and competitive Europe while maintaining fiscal sustainability. Based on a comprehensive literature review on the effects of fiscal rules and investment clauses on public finances, this in-depth analysis provides some guidance how higher public investments can be achieved by a targeted golden rule without harming fiscal sustainability in the EU fiscal framework. The study also discusses the role of investments in the current proposals of the European Commission on the reform of the EU Economic Governance.

This Policy Brief examines how minimum income support (MIS) schemes contribute to the stabilization of disposable incomes in times of crisis in Europe. MIS systems act as a “safety net of last resort” in many European welfare states, but to varying degrees. The results from the simulation of stylized unemployment shocks hitting labor markets suggest that the tax-transfer system overall contributes to income stabilization in periods of crises. However, the MIS schemes’ individual contribution is relatively small, especially as set against the unemployment insurance system.

Our paper quantifies ECB communication on the Governing Council meeting days. The key questions we address are as follows: What are the main communication patterns in the ECB press conference? Do shifts in communication patterns affect stock market volatility on the Governing Council meeting days?

In February 2020, the European Commission announced that it would present a plan for reforming the economic governance of the Eurozone, including the rules for public debt. The project was postponed by the outbreak of the corona pandemic, but now the reform is to come. There is a widespread demand to expand debt leeway, for example for climate protection spending. In view of the already very high national debt and rising inflation, this is the wrong way to go. Fiscal policy coordination should focus more on expenditure reallocations and thus on improving the quality, not the quantity of public spending. What is needed is a modified handling of the existing rules, not a change in the rules themselves.