November 12, 2021
Excerpt:
- Fiscal policies in Europe performed much better during COVID 19 than in earlier crises. They demonstrated their power to support the single monetary policy and the transition to inclusive, digital and green growth. The use of the general escape clause, the PEPP and the NGEU all played important roles. How can Europe build on this experience to reshape its fiscal architecture?
- The general escape clause will expire at the end of 2022. That is in line with euro area approaching the pre-pandemic growth path. How to manage the transition? How to avoid risks to stability, growth and structural transformation?
- Monetary stability and financial stability are crucial elements of a stability-oriented macroeconomic framework. Crises in the euro area illustrate how disruptive financial instability can be. How can institutions, rules and procedures be reformed in order to protect monetary stability and deliver financial stability? Or, from the viewpoint of the central bank: how to avoid fiscal dominance and financial dominance?
- Countries are very different in their initial conditions, structural characteristics and political priorities. Fiscal strategies must consider this. The budget lies at the heart of national politics and parliament sovereignty. Could a network of independent and reinforced national fiscal councils with an independent and reinforced European Fiscal Council at its center provide the right balance between differentiation, flexibility and discipline? Could it provide the right balance between the primacy of national politics and the internalization of European-wide spillovers?How would this fit with other elements of the fiscal architecture?
- Accrual and double-entry accounting are the best practice in both private and government sector accounting since the XIV century. The practice is now the rule among large private-sector corporations, but it is the exception in government. But sound accounting is the groundwork for analysis, forecasting, management, policy decision-making and accountability. Good information is a prerequisite for the proper functioning of the political process. Could Europe take the lead in the adoption of best accounting practices by the general government and the public sector?