Euro-Area Fiscal Stance: From Theory to Practical Implementation
27 Pages Posted: 30 Sep 2016
Date Written: August 16, 2016
Despite large automatic stabilizers, the performance of the Euro area as a whole in terms of fiscal stabilization is relatively poor. This report argues that a meaningful fiscal stance for the Euro area should rely on the current account as a complement to the output gap, and be coordinated only in “exceptional” times, the usual bottom-up approach of fiscal policy remaining appropriate for “normal” times. In such setting, the European Fiscal Board would play a key role in advising the Commission on the existence of “exceptional” circumstances, on the adequate aggregate fiscal stance and on its desirable distribution across member states.
Keywords: fiscal stance, coordination of fiscal policies, euro area, European Fiscal Board
JEL Classification: E620, F420, F450
Suggested Citation: Suggested Citation