The seminar kicked off with Roel Beetsma, professor at the Amsterdam School of Economics, and Xavier Debrun, PhD, advisor at the National Bank of Belgium, both members of the European Fiscal Board (EFB), presenting the findings of the EFB Annual Report. The board’s fourth annual report assessed the implementation of the EU fiscal framework in 2019. It suggests that even before the COVID-19 shock, the EU fiscal framework had already fallen short of its aims. While the shock has further exposed the weaknesses of the framework, it has also provided a window of opportunity for reform while the escape clauses are active.
The future of the EMU’s architecture
The presentation of the EFB report was followed by discussions delivered by Agnès Bénassy-Quéré, professor at the Paris School of Economics, and Thomas Westphal, director general for European policy at the German Ministry of Finance.
The discussions centred around three long-standing gaps in EMU’s architecture:
- the lack of a genuine and permanent central fiscal capacity;
- adverse incentives to maintain or scale up growth-enhancing government expenditure;
- an intractable set of rules and benchmarks poorly tailored to country-specific needs and capacities.
The panel was unanimous in concluding that reforms as well as fiscal rules and their effective implementation in the monetary union would be more important than ever after the COVID-19 crisis. The focus was put both on the right share of (reasonable) investments and on the necessity to simplify fiscal rules.
The audience contributed to the subsequent discussion with various questions. For instance, reference was made to the political and fiscal opportunities offered by the EU’s COVID-19 recovery plan: “Next Generation EU” enables the EU to level asymmetric European economies and achieve a better design for EU-wide fiscal rules.