The debt crisis in the euro area has highlighted the need to reform the monetary union’s institutional architecture. Although important reforms have been adopted, it is unclear whether they are sufficient to guarantee the stable development of public finances, the banking sector and the economy as a whole. The division of responsibility between monetary and fiscal policy is always the subject of conflict. The coordination and supervision of economic and fiscal policy in the framework of the Stability and Growth Pact is not effective enough, and rule violations go unpunished.
For these reasons, EconPol Europe’s research will focus on these questions:
- What are the impacts of fiscal policy in the current economic situation (high private and public sector debt, low interest rates and slow economic growth)?
- Is the Stability and Growth Pact suitable as a framework for the coordination of fiscal policy in Europe? If reform is needed, how should these reforms be implemented?
- What are the advantages and disadvantages of setting up fiscal stabilisers at the European level (for example, with a European unemployment insurance scheme)?