The Eurozone as a Trap and a Hostage: Obstacles and Prospects of the Debate on European Fiscal Rules
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DOI: 10.1007/s10272-020-0917-x
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Orsola Costantini
The Eurozone as a Trap and a Hostage: Obstacles and Prospects of the Debate on European Fiscal Rules The debate about what, whether and when fiscal rules should be reinstated is of existential relevance for the European Union for at least two main reasons. First, the recovery is, or should be, a public good that governments must take care © The Author(s) 2020. Open Access: This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (https://creativecommons.org/licenses/by/4.0/). Open Access funding provided by ZBW – Leibniz Information Centre for Economics.
Orsola Costantini, United Nations Conference on Trade and Development, Geneva, Switzerland.
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of (Shapiro, 2019). Previous attempts to privatise the burden of recovery have failed and a quick return to austerity entails serious economic, social, environmental, and probably political risks. Second, the European fiscal framework impacts much more than just the size of the budget deficit. It influences defining aspects of the social contract, including universal access to healthcare, pensions, inheritance taxes and social mobility, youth employment and the gender divide. As much as economists, as citizens, should contribute to the discussion, the problem is essentially political (Roncaglia, 2015; Di Majo, 2020). But no fair intra-European debate can occur if the financial stability of the euro area is not somewhat secured. This, alas, may amount to a conundrum.
Intereconomics 2020 | 5
Forum
Circumstantial actions have so far allowed the eurozone bumblebee to keep flying. But key factors of fragility are entrenched in its architecture. If the risks associated with a monetary union without fiscal transfers have been highlighted for a long time,1 some additional factors were introduced during and after the debt crisis of 2010. In fact, what was a lost decade for growth, was a productive decade in terms of legislative innovation both nationally and at the EU level (Costantini, 2017; Clency, 2019). Some innovations came from a functional, but far from uncontroversial, expansion of the pre-existing rules. Those were, if belated, often vital to the survival of the euro and include the ECB public bonds purchasing programmes. In contrast, the more political evolution seemed to push in an opposite destabilising direction, as were the private sector involvement, and the establishment of an incomplete banking union. The fiscal constraints were tightened and forced upon some member countries as a condition for accessing the rescue programmes. All of these reforms took advantage of and then reinforced a pecking order among the member countries, ultimately establishing austerity as a common social and political project (Truger, 2013; Storm and Nastepaad, 2016). Nationally, most countries underwent regressive reforms of public spending – especially of pensions, healthcare and other social policies – and the labour market. While destabilising, this restric
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