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...

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...