In reaction to the sharp deterioration of fiscal positions and a sovereign debt crisis in the majority of EU member states, EU leaders have been strengthening the EU economic governance framework, in particular for the eurozone member states. This has been reflected mainly through a reinforcement of the Stability and Growth Pact (SGP) within the so-called six-pack and through the recent adoption of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG).
The objective of this paper is to present the main decisions taken to address intensifying problems in the EU and assess them from the point of view of stability of the eurozone. The paper argues that the recent adoption of the six-pack and of the TSCG has created a legal basis for more effective governance structure that is much stronger than previously, and closer fscal coordination among EU member states in order to ensure public fnance sustainability. The practical results will depend, however, on the political willingness of countries to accept the new rules and rigorous enforcement of those rules.
Most of the new solutions continue the previous approach: stricter preventive and punishing rules, and their more rigorous application. TSCG has adopted a new element: parallel to EU rules, there should be enhanced national rules (possibly in the form of constitutional commitments) and national institutions responsible for fscal discipline. This approach implies that international rules are not strong enough for sovereign countries, which agree to be subject to democratically elected national authorities but do not want to follow decisions by “outside” institutions. In addition, reverse voting in the Council encourages for more pragmatic, economically justifed use of the modifed SGP. In view of a lack of political will to move forward into a political union, this seems the only realistic approach to ensure fscal stabilization and keep the eurozone alive in the short and medium run.
Two main research methods have been applied:
(a)Statistical analysis of data on changes of the public fnances in the EU member states (budgetary defcit and public debt),
(b)comparative analysis of successive EU documents on strengthening economic governance and identifcation of strong and weak aspects of the new documents from the point of view of stability of the eurozone.
The main conclusion is that in a situation of a lack of political will to move forward into a political union, the only realistic approach to ensure fscal stabilization and keep the eurozone alive in the short and medium term seems to be to enforce rigorously the recently adopted new commitments aiming at better fscal control of euro area members.
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