In this paper we suggest that Eurozone countries face a policy trade-off among: 1) a common rule imposing co-movements in fiscal policy; 2) financial stability; and 3) financial integration. We provide empirical evidence documenting the existence of such a trade-off in the period characterized...

In the new European Union fiscal framework proposed by the European Commission in April 2023, medium-term fiscal adjustment requirements would be determined by country-by-country debt sustainability analysis (DSA), the 3 percent deficit ceiling and simple rules requiring minimum deficit and debt...