Fiscal Policies and the EU’s Governance: Only Rules and a Lack of Stabilisation Measures
Abstract The chapter begins with an illustration of the perceived low default risk in the first decade after the birth of Economic and Monetary Union (EMU), together with an explanation of the rationale behind the rules on public budgets applied to members of monetary unions. It then illustrates the deterioration of public accounts and sovereign debts that has occurred since the recent crises that hit the euro area. The chapter also explains the content of the Stability and Growth Pact (SGP, and its various reforms) and the Fiscal Compact. Critical discussion is conducted of the ‘austerity policies’ adopted in the Eurozone in recent years, emphasising their deep impact on the real economies, especially of the weakest euro area countries, and the ‘self-defeating’ nature of such policies.
Keywords Default risk • Public accounts • Stability and Growth Pact (SGP) • Fiscal Compact • Austerity policies