1. Home
  2. Press
  3. IW News
  4. Concept with Shortcomings
Show image in lightbox Concept with Shortcomings
(© Photo: PhotographyByMK - Fotolia)
The new European Fiscal Board IW News 22. October 2015

Concept with Shortcomings

The European Commission has presented plans to solidify the European Monetary Union. As one of the central elements, an advisory European Fiscal Board will be established in November 2015. However, the concept suffers from serious shortcomings.

The new Fiscal Board will be comprised of five renowned economic experts who will be appointed for a period of three years. The Board will be administratively attached to the Commission’s General Secretariat and is meant to be independent. Apart from evaluating the implementation of the Stability and Growth Pact (SGP), the experts shall particularly assess the aggegate fiscal stance of the euro area and provide advice on the appropriate course for the future in this respect – an aspect which appears rather important for the EU Commission. The Fiscal Board may also advise the Commission on the appropriate national fiscal stances consistent with the attained aggregate fiscal course to be persued.

The Commission’s concept falls short in three main respects:

Firstly, it appears questionable whether the intended independence can be achieved, if the Board is closely attached to the General Secretariat. At the same time, a high degree of independence is utterly needed, as the Juncker Commission has interpreted the SGP in a rather lax manner recently. As a result, the impression arose that the primacy of policy and the will to use political discretion currently dominate in Brussels. Therefore, a truly independent Fiscal Board should closely monitor the interpretation of the SGP and should issue clear public warnings if the Commission does not stick to its role as a guardian of the Treaties. The current plans do not appear to ensure the attainment of this objective.

Secondly, the choice of experts is important in this respect. Only those renowned economists should be considered eligible who regard the SGP as a reasonable body of rules. Otherwise, the Board will not be able to fufill its intended obligation.

Thirdly, the focus on the aggregate fiscal stance of the Euro area should not be emphasized too much. For example, research by the Deutsche Bundesbank has shown that the spillovers of a more expansionary fiscal policy in Germany to the stressed Euro area countries are rather limited. In addition, it is highly important that Euro area countries come closer to a balanced structural fiscal budget in order to achieve sufficient leeway to counter future crises by means of anticyclical fiscal policy. It would be questionable in this respect, if a country that is on the way towards a balanced budget was advised to change course in order to achieve a more expansionary overall fiscal stance of the euro area as a whole.

More on the topic

Read the article
Net contributors and net recipients in the EU
Berthold Busch / Björn Kauder / Samina Sultan IW-Report No. 48 28. September 2023

Where does the money from the EU budget go?: Net contributors and net recipients in the EU

Germany's net position in 2022 is slightly down on the previous year, from €21.4 billion to €19.7 billion euros, but it is still significantly higher than in the pre-Brexit period. On average for 2014 to 2020, the last Multiannual Financial Framework, it was ...

IW

Read the article
Hans-Peter Klös / Sandra Parthie in Martens Centre for European Studies External Publication 21. June 2023

The UN Sustainable Development Goals: Some Reflections from the Perspective of the European Economic and Social Committee

To some, it might seem odd that the Sustainable Development Goals (SDGs) would be of relevance to the highly developed industrial nations that form the EU.

IW

More about this topic

Content element with id 8880 Content element with id 9713