Towards a European Framework for Fiscal Standards: Data Collection, Description and Institutional Analysis

Abstract

The fiscal rules of the Stability and Growth Pact have consistently failed to enforce good fiscal governance and contain rising debt ratios across euro area economies. This article illustrates the unsustainable nature of Greek fiscal policy prior to the global financial crisis and argues for the adoption of fiscal standards to improve fiscal policy. This will require a common and transparent framework for debt sustainability analysis. An evaluation of the euro area’s newest member along the lines of sustainable fiscal governance shows that Croatia is in a stronger fiscal position than Greece was after adopting the euro. Moreover, the resilience and crisis management methods of the Eurozone as a whole have improved significantly. To safeguard against future crises and prepare euro area economies for the fiscal strain of ageing populations and climate change, however, the Eurozone needs to transition from fiscal rules to fiscal standards.