Reflections on the Euro Area Fiscal Stance

Avoiding the mistakes of the past, when the good times were not used to build buffers, will be crucial to avoid countries again being forced to engage in a pro-cyclical fiscal tightening in the next downturn.     

The cyclical impact of EU cohesion policy in fast growing EU countries

Most of the newly acceded central and east European EU countries are among the main beneficiaries of EU Cohesion Policy. The main objective of this policy is to improve the long-term growth and employment prospects of the supported regions, and thereby to support convergence towards higher levels of per capita income. In the short run, however, EU Cohesion Policy may at times amplify macroeconomic challenges for supported countries. In periods of a downturn of the economy it can have a stabilising impact. During periods of unsustainably fast economic growth, however, its short-term demand effects may contribute to internal and/or external macroeconomic imbalances. Economic policymakers should thus ensure that EU Cohesion Policy enhances long-term productivity, while avoiding, in times of overheating, an increased risk of unsustainable developments as a result of the additional demand stimulus from EU Cohesion Policy. The opinions expressed in this article are those of the authors and do not necessarily reflect those of the European Central Bank. The authors are grateful to Martin Bijsterbosch, Gesa Miehe-Nordmeyer, Ad van Riet, Philipp Rother and Desom Weller for their helpful comments.     

The Euro Area in Between Crises? Considerations on Fiscal Policies and Rules

Intereconomics - Credibility of the revised fiscal rules will be crucial so that vulnerable countries can benefit from confidence effects. National ownership will be key in that respect and can be...