Reforming the European fiscal rules: old wine in new bottles?
A monetary union cannot deliver price stability without sustainable public finances in every single member state. This was well understood by the Delors Committee, which provided the intellectual underpinning of the Maastricht treaty in 1992. Maastricht’s logic (embedded in an EU Regulation known as the Stability and Growth Pact) was that simple and enforceable fiscal rules should prevent the kind of gross fiscal errors that could put the survival of the common currency at risk. Have these rules delivered? The evidence is mixed at best, although most would agree that for many countries, the state of public finances would have been worse without those rules. Still, designing and implementing fiscal rules is so hard that the framework is about to undergo its third wave of major reforms.