Towards new fiscal rules for the euro zone?

Prominent French economists around Macron have written a reform proposal for the European Stability and Growth Pact and have discussed it at the VIII. New Paradigm Workshop.




28. MAY 2021


1 MIN.

In a policy paper for the Conseil d’analyse économique (CAE), French economists Philippe Martin, Jean Pisani-Ferry and Xavier Ragot developed a reform proposal for the European fiscal framework. Among other things, they call for the abolition of the rigid percentage limits and the criterion of measuring debt on the basis of economic performance, to allow the individual member states more flexibility in their budget planning, and to achieve better fiscal policy coordination within the Eurozone by taking greater account of macroeconomic imbalances.

What are the chances of this quasi-official French proposition? How should and will the new German government position itself on this issue? These questions were discussed at the VIII. New Paradigm Workshop.

The study’s authors have first presented their reform proposal. Participants in the subsequent discussion were Annamaria Simonazzi, economics professor at the Sapienza University of Rome, the Head of the European Department at the Ministry of Finance Thomas Westphal, and the Bruegel Director Guntram Wolff. The session was moderated by Martin Sandbu (Financial Times).

Read the proposal here.

Rewatch the session here



The euro was planned during a period in which economic policy making was driven by a deep belief in market liberalism and the near impossibility of systemic financial crises. This belief has been brought into question since the euro crisis, which showed that panics do happen. New thinking needs to focus on developing mechanisms to protect eurozone countries from such panics and to foster economic convergence between members.