4 - The Internal Quality of the New Economic Governance of the Eurozone: The Case of Fiscal Policy Rules

Summary

Chapter 4 conducts a qualitative assessment of the substantive rules underlying Eurozone economic governance, with the view of testing their actual contribution to trust-generation and uncertainty-reduction. Focused on the Eurozone’s fiscal policy rules, the Chapter shows that the common fiscal discipline of the Eurozone suffers from serious qualitative flaws, pertaining to their complexity, their opacity, their internal inconsistency and the unconstrained discretion that the Commission enjoys as their main enforcer. It argues that the system’s reliance on policy rules has become excessive and counterproductive, as it now works against the objectives of certainty, stability and equality that it was supposed to achieve, instills distrust and facilitates arbitrariness. Hence, the Chapter highlights the pressing need for an overhaul of the existing policy rules and a deeper institutional reflection about the legitimacy of the rules-based approach to economic and fiscal governance.