Annals of the University of Oradea: Economic Science (Jul 2016)
TOWARD A STRONGER FISCAL CONVERGENCE AND DISCIPLINE FOR EUROPE – HOW FAR ARE WE?
Abstract
Economies frequently pursue policies that tend to lead to fiscal crises, usually sustained by deficits and high public debt levels. First, states borrow in order to sustain their economies, thus accumulating debt and deficits, then are submitted to fiscal rules as constraints and are obliged to adopt restrictive policies. This circle can be brought to an end through fiscal discipline, applicable common rules strengthening the fiscal convergence. Our goal was to quantify fiscal convergence for the EU and the Eurozone, by using a methodology that implies calculating an average score for the degree of fiscal convergence, and placing a specific group of countries or regions in one of the chosen classes. We used in our analysis a number of 12 quantitative and qualitative variables that covered key aspects of both fiscal discipline and fiscal convergence. Both the EU and the Economic and Monetary Union scored 1.6 points on our scale, placing them in class B regions, which present some degree of converge and discipline, but are still far from achieving full converge and high discipline levels as commitment to existence fiscal rules as constraints. So, as it would seem, although there are fiscal constraints implemented through signed treaties, EU’s fiscal discipline is far from outstanding, even if good and applicable mechanisms are available for usage
