Reforms aiming at lowering the tax burden and cutting social benefits may boost efficiency and output, and improve market adjustment to shocks, but, by reducing the size of automatic stabilisers, may also imply less cyclical smoothing. This would be problematic in EMU given the loss of national...

EU11 economies are among the most open economies globally. The process of trade integration and the creation of GVCs also drove a significant inflow of FDI into these countries. While integration into the EU and FDI have enhanced their growth potential, these developments have also made them...

An early criticism of the Stability and Growth Pact (SGP) has pointed to its asymmetric nature and the weak mechanisms to prevent politically-motivated fiscal policies: its constraints would bite in downswings but not in upswings, especially if, in the latter, the electoral cycle increases the...

The Maastricht Treaty is ten years old. Its fiscal rules played a key role in kickstarting and sustaining the budgetary retrenchment efforts in European Union countries in the run-up to economic and monetary union (EMU). The experience of the Maastricht-induced fiscal consolidation shows that...

The Sapir report in 2004 famously dubbed the EU budget a historical relic. In spite of calls from many quarters for a comprehensive budget reform, the Council negotiation was hampered by many institutional and political constraints and managed to deliver only limited change. However, the final...

While the Maastricht Treaty establishes the entry conditions for Member States to join the single currency, the Stability and Growth Pact (SGP) aims to make budgetary discipline a permanent feature of EMU. Consequently, the Pact is commonly interpreted as a major building block of EMU's...