Will the new stability and growth pact succeed? An economic and political perspective

While the Maastricht Treaty establishes the entry conditions for Member States to join the single currency, the Stability and Growth Pact (SGP) aims to make budgetary discipline a permanent feature of EMU. Consequently, the Pact is commonly interpreted as a major building block of EMU's architecture: the SGP ‘must rank as one of the most remarkable pieces of policy coordination in world history. The purpose of this paper is to offer an initial evaluation of the SGP reform. Section Two reviews the main fiscal policy developments in the early years of EMU which were at the basis of the crisis of the SGP ‘mark I'. Section Three describes the reformed SGP and an assessment of its main features. Section Four presents some reflections on the political economy of the EU rules, comparing the new SGP with the Maastricht Treaty and the SGP ‘mark I'. The final section concludes.Stability and Growth Pact, Economic Monetary Union (EMU), Maastricht Treaty, Buti

"Constrained Flexibility" as a tool to facilitate reform of the EU budget

The Sapir report in 2004 famously dubbed the EU Budget a historical relic. In spite of calls from many quarters for a comprehensive budget reform, the Council negotiation was hampered by many institutional and political constraints and managed to deliver only limited change.However, the final agreement on the Multiannual Financial Framework 2007/13 did introduce a potentially important novelty, namely a review clause in 2008/9. Such an occasion should be seized to introduce appropriate incentives and tools for revamping the EU budget with the aim of making it consistent with the Lisbon-oriented objectives of the EU. This paper argues for the respect of the Multiannual Financial Framework over the period covered rather than in every single year and per every single heading. This should be accomplished via an inter-temporal guarantee of the respect of the Multiannual Financial Framework and coupled with cost-benefit analysis of the additional spending carried out at the EU level. Such “constrained flexibilityâ€, which can be introduced either under the current or the new Lisbon Treaty, should be supported by appropriate governance arrangements to ensure the respect of subsidiarity, allow an efficient running of the budget and enforce budgetary discipline.EU budget, constrained flexibility, fiscal federalism, Buti, Nava

8.03: A Arte na Universidade, A Universidade na Arte

Este texto corresponde à primeira parte de meu memorial para a obtenção do título de Livre-Docente na especialidade "Gravura, Matriz e Estampa", junto ao Departamento de Artes Plásticas da Escola de Comunicações e Artes da Universidade de São Paulo. Baseia-se na minha experiência como aluno, professor e artista na Unicamp e na USP. A defesa foi realizada nos dias 23 e 24 de junho de 2008. A banca examinadora foi integrada pelos Professores Doutores Domingos Tadeu Chiarelli (presidente), Marco Garaude Giannotti, Aracy Amaral, Laymert Garcia dos Santos e Celso Favaretto.This paper was adapated from the first part of the summary of my previous works, presented as part of my application to the position of Adjunct Professor of the discipline "Engraving, Pattern and Stamp", taught at the Department of Fine Arts of ECA/ USP. It is based on my experience as a student, teacher, and artist at Unicamp and USP. The examination board was presided by Domingos Tadeu Chiarelli and further composed by Marco Garaude Gianotti, Aracy Amaral, Laymert Garcia dos Santos, and Celso Favaretto

Close to Balance or in Surplus. A Policy Maker’s Guide to the Implementation of the Stability and Growth Pact

currency; economic integration; EMU; Euro; European Central Bank; political economy; stability pact

Revisiting the Stability and Growth Pact: grand design or internal adjustment?

The Stability and Growth Pact is under fire. Problems have appeared in sticking to the rules. Proposals to reform the Pact or ditch it altogether abound. But is the Pact a flawed fiscal rule? Against established criteria for an ideal fiscal rule, its design and compliance mechanisms fare reasonably well. Where weaknesses are found, they tend to reflect trade-offs typical of supra-national arrangements. In the end, only a higher degree of fiscal integration would remove the inflexibility inherent in the recourse to predefined budgetary rules. This does not mean that the EU fiscal rules cannot be improved. However, given the existing degree of political integration in EMU, internal adjustment rather than attempting to re-design the rules from scratch appears a more suitable way to bring about progress. Redefining the medium term budgetary target, improving transparency, tackling the pro-cyclical fiscal bias in good times, moving towards non-partisan application of the rules and improving transparency in the data can achieve both stronger discipline and higher flexibility.sgp, stability and growth pact, Buti, Eijffinger, Franco

Fiscal policy in EMU: Rules, discretion and political incentives

The fiscal philosophy of EMU's budgetary rules is to bring deficits close to balance and then let automatic stabilisers play freely. Given the large tax and benefit systems in Europe, relying mainly on automatic stabilisation would allow a relatively high degree of cyclical smoothing while avoiding the typical pitfalls of fiscal activism. While this is, in most circumstances, good economic policy, it is evidently not regarded as good politics. The current difficulties of EMU's fiscal policy framework have little to do with its alleged fault lines and much to do with the resurgence of electoral budget cycles amid a weak system of incentives to abide by the agreed rules.EMU, economic and monetary union, fiscal policy, taxation, budgetary regulation, Marco Buti, van den Noord

What is the impact of tax and welfare reforms on fiscal stabilisers? A simple model and an application to EMU

Reforms aiming at lowering the tax burden and cutting social benefits may boost efficiency and output, and improve market adjustment to shocks, but, by reducing the size of automatic stabilisers, may also imply less cyclical smoothing. This would be problematic in EMU given the loss of national monetary autonomy. This paper argues that the alleged trade-off between efficiency/flexibility and stabilisation depends on the typology of shocks affecting the economy.taxation, tax reforms, fiscal policy, social welfare, social benefits, fiscal stabilisers, automatic stabilisers, economic and monetary union, EMU, shocks, Buti, Van den Noord

Euro area policy mix: From horizontal to vertical coordination

A new CEPR Policy Insight by Marco Buti and Marcello Messori argues that the forceful policy response of the EU and its member states to the COVID Pandemic, and in particular the move to a more structured \u2018vertical\u2019 coordination between national and EU fiscal policies, has led to a more balanced euro area policy mix, which has allowed the rapid absorption of the euro area\u2019s dramatic recession and favoured a strong bouncing back of its economy in the current year. Moving forward, the authors argue that transitioning to a structured vertical coordination between national and EU budgets would help ensure an adequate fiscal stance for the future, and avoid the overburdening of the single monetary policy