It is largely recognised that fiscal policy will have larger responsibilities for cyclical stabilisation in EMU given the loss of the monetary instrument. At the same time, the EMU's budgetary framework emphasises the need to rely on automatic fiscal stabilisers, rather than active policies in...

It is often claimed that tax and welfare reforms that aim at enhancing efficiency may come at the cost of cyclical stabilisation. Reducing the generosity of welfare systems and lowering taxes may boost efficiency and output, and improve market adjustment to shocks. But, by reducing the size of...

This paper deals with the role of fiscal policy in the Euro area economic policy framework. The centralisation of monetary policy, applied according to euro zone values, generates a loss of stabilisation capacity, since cyclic conditions can be different in each economy. A more active fiscal...

Within this paper we specify a symmetric two country model for the euro area to evaluate monetary and fiscal policy interaction with decentralized fiscal authorities. Obviously this calls for rules which neatly balance the chances and perils. Thereby we show that stringent rules are a...

On 5-6 September 2012 SUERF held its 30th Colloquium “States, Banks, and the Financing of the Economy” at the University of Zürich, Switzerland. The papers included in this SUERF Study are based on contributions to the Colloquium. All the chapters in this publication discuss from different...

The economic policy framework of the Euro area displays significant limitations. While these deficiencies are a result of the design of the Euro project, they have become increasingly evident during the current economic crisis. The European Commission and the Council have put forward a set of...

The Stability and Growth Pact has been under fire ever since it was born.But is the Pact a flawed fiscal rule?Against established criteria for an ideal fiscal rule, its design and compliance mechanisms show strengths and weaknesses. The latter tend to reflect tradeoffs typical of supra-national...

On 5-6 September 2012 SUERF held its 30th Colloquium “States, Banks, and the Financing of the Economy” at the University of Zürich, Switzerland. The papers included in this SUERF Study are based on contributions to the Colloquium. All the chapters in this publication discuss from different...

The Stability and Growth Pact (SGP) in EMU urges governments to achieve a position close to balance or surplus over the medium term. So far, the fiscal framework has successfully contributed to the EMU public financial sustainability and may have contributed to financial stability, as well as to...