EU Fiscal Rules

Question A:

The fiscal rules of the European Union should give more flexibility to member countries.

Responses weighted by each expert's confidence

Question B:

The Italian budget for 2019 that the European Commission rejected in October would have increased Italy’s risk of fiscal insolvency substantially.

Responses weighted by each expert's confidence

Question C:

If France runs a 2019 budget deficit of around 3.4% of GDP, as announced by President Macron’s government, France’s risk of fiscal insolvency will increase substantially.

Responses weighted by each expert's confidence

Question A Participant Responses

Participant University Vote Confidence Bio/Vote History
Allen
Franklin Allen
Imperial College London
Disagree
5
Bio/Vote History
There are arguments both ways. Not fully persuaded either way.
Antras
Pol Antras
Harvard
Uncertain
5
Bio/Vote History
Besley
Timothy J. Besley
LSE Did Not Answer Bio/Vote History
Blanchard
Olivier Blanchard
Peterson Institute
Agree
8
Bio/Vote History
the rules are rigid, but are broken with great regularity. There must be a better way.
Bloom
Nicholas Bloom
Stanford
Uncertain
3
Bio/Vote History
Blundell
Richard William Blundell
University College London Did Not Answer Bio/Vote History
Bénassy-Quéré
Agnès Bénassy-Quéré
Paris School of Economics
Uncertain
5
Bio/Vote History
More flexibility in the sense of more leeway for counter-cyclical policies; not in the sense of an ever rising debt nor even more complexity
Carletti
Elena Carletti
Bocconi
Uncertain
10
Bio/Vote History
It depends on what flexibility could be used for.
Danthine
Jean-Pierre Danthine
Paris School of Economics
Agree
2
Bio/Vote History
De Grauwe
Paul De Grauwe
LSE Did Not Answer Bio/Vote History
Eeckhout
Jan Eeckhout
UPF Barcelona
Uncertain
6
Bio/Vote History
Fehr
Ernst Fehr
Universität Zurich Did Not Answer Bio/Vote History
Freixas
Xavier Freixas
Barcelona GSE Did Not Answer Bio/Vote History
Fuchs-Schündeln
Nicola Fuchs-Schündeln
Goethe-Universität Frankfurt Did Not Answer Bio/Vote History
Galí
Jordi Galí
Barcelona GSE
Agree
8
Bio/Vote History
Given the limited synchronisation, and the single monetary policy, it is desirable to have a strong stabilizing tool at the country level.
-see background information here
Garicano
Luis Garicano
LSE Did Not Answer Bio/Vote History
Giavazzi
Francesco Giavazzi
Bocconi
Agree
6
Bio/Vote History
provided more flexibility at the country kevel is accompanied by more “market discipline”
Griffith
Rachel Griffith
University of Manchester Did Not Answer Bio/Vote History
Guerrieri
Veronica Guerrieri
Chicago Booth
Uncertain
7
Bio/Vote History
Guiso
Luigi Guiso
Einaudi Institute for Economics and Finance
Disagree
6
Bio/Vote History
the common currency requires some fiscal discipline at the national level
Honohan
Patrick Honohan
Trinity College Dublin
Agree
8
Bio/Vote History
Javorcik
Beata Javorcik
University of Oxford
Agree
6
Bio/Vote History
Kleven
Henrik Kleven
Princeton Did Not Answer Bio/Vote History
Krahnen
Jan Pieter Krahnen
Goethe University Frankfurt
Strongly Disagree
6
Bio/Vote History
The rule itself should be rock-solid, the user should herself select the buffers required to achieve the desired degree of flexibility.
Krusell
Per Krusell
Stockholm University
Disagree
6
Bio/Vote History
Kőszegi
Botond Kőszegi
Central European University
No Opinion
Bio/Vote History
La Ferrara
Eliana La Ferrara
Harvard Kennedy
Agree
3
Bio/Vote History
Leuz
Christian Leuz
Chicago Booth
Agree
3
Bio/Vote History
Flex good to avoid pro-cyclical tightening but issue is time inconsistency&incentives. Adopt bounds for deficits that depend on cycle in EU?
Mayer
Thierry Mayer
Sciences-Po Did Not Answer Bio/Vote History
Meghir
Costas Meghir
Yale
Agree
9
Bio/Vote History
Neary
Peter Neary
Oxford
Agree
7
Bio/Vote History
Maastricht rules are very restrictive. Some kind of closer fiscal union needed to control moral hazard, but stabilisation more important
O'Rourke
Kevin O'Rourke
Oxford
Agree
8
Bio/Vote History
Pagano
Marco Pagano
Università di Napoli Federico II
Disagree
5
Bio/Vote History
Pastor
Lubos Pastor
Chicago Booth
Agree
8
Bio/Vote History
Yes but only after reforms making sovereign default possible (e.g., break the doom loop). Cannot use monetary policy => need fiscal policy.
Persson
Torsten Persson
Stockholm University
Uncertain
6
Bio/Vote History
Pissarides
Christopher Pissarides
London School of Economics and Political Science
Strongly Agree
10
Bio/Vote History
Member countries are still exposed to different shocks and fiscal policy should partly respond to idiosyncratic requirements
Portes
Richard Portes
London Business School
Strongly Agree
9
Bio/Vote History
Prendergast
Canice Prendergast
Chicago Booth
Uncertain
8
Bio/Vote History
Reichlin
Lucrezia Reichlin
London Business School
Disagree
10
Bio/Vote History
Repullo
Rafael Repullo
CEMFI
Agree
6
Bio/Vote History
Rey
Hélène Rey
London Business School
Strongly Agree
9
Bio/Vote History
more flexibility over the cycle, more ownership. See Franco german proposals below.
-see background information here
Schoar
Antoinette Schoar
MIT Did Not Answer Bio/Vote History
Sturm
Daniel Sturm
London School of Economics
Disagree
5
Bio/Vote History
Van Reenen
John Van Reenen
LSE
Agree
7
Bio/Vote History
Eurocrisis period showed that Commission had too much of a pro-austerity bias
Vickers
John Vickers
Oxford
Agree
5
Bio/Vote History
Voth
Hans-Joachim Voth
University of Zurich
Uncertain
10
Bio/Vote History
Weder di Mauro
Beatrice Weder di Mauro
The Graduate Institute, Geneva
Agree
10
Bio/Vote History
Mostly it is about making the rules less pro-cyclical and less policially divisive (see CEPR Policy Insight 91)
Whelan
Karl Whelan
University College Dublin
Agree
8
Bio/Vote History
The rules should focus on maintaining overall debt sustainability and not on randomly chosen figures (such as deficit limits of 3 percent).
Wyplosz
Charles Wyplosz
The Graduate Institute Geneva
Uncertain
1
Bio/Vote History
My long-held view is that fiscal discipline is a national prerogative, which is why the pact always fails when needed.
Zilibotti
Fabrizio Zilibotti
Yale University
Disagree
6
Bio/Vote History

Question B Participant Responses

Participant University Vote Confidence Bio/Vote History
Allen
Franklin Allen
Imperial College London
Agree
6
Bio/Vote History
Italy has significant fiscal problems. They need to get their debt under control.
Antras
Pol Antras
Harvard
Uncertain
5
Bio/Vote History
Besley
Timothy J. Besley
LSE Did Not Answer Bio/Vote History
Blanchard
Olivier Blanchard
Peterson Institute
Disagree
9
Bio/Vote History
bad, but not the end of sustainability. https://piie.com/publications/policy-briefs/impact-italys-draft-budget-growth-and-fiscal-solvency
Bloom
Nicholas Bloom
Stanford
Strongly Agree
8
Bio/Vote History
Blundell
Richard William Blundell
University College London Did Not Answer Bio/Vote History
Bénassy-Quéré
Agnès Bénassy-Quéré
Paris School of Economics
Disagree
8
Bio/Vote History
The problem is not the deficit of 2019 but its use and the lack of commitment for the future.
Carletti
Elena Carletti
Bocconi
Agree
10
Bio/Vote History
the main problem is what the deficit was supposed to be used for, not necessarily the size of the deficit.
Danthine
Jean-Pierre Danthine
Paris School of Economics
Disagree
3
Bio/Vote History
Needs to distinguish between a one-shot deviation from set deficit limit and a significant weakening of commitment to decrease debt to GDP
De Grauwe
Paul De Grauwe
LSE Did Not Answer Bio/Vote History
Eeckhout
Jan Eeckhout
UPF Barcelona
Agree
7
Bio/Vote History
Fehr
Ernst Fehr
Universität Zurich Did Not Answer Bio/Vote History
Freixas
Xavier Freixas
Barcelona GSE Did Not Answer Bio/Vote History
Fuchs-Schündeln
Nicola Fuchs-Schündeln
Goethe-Universität Frankfurt Did Not Answer Bio/Vote History
Galí
Jordi Galí
Barcelona GSE
Uncertain
4
Bio/Vote History
Garicano
Luis Garicano
LSE Did Not Answer Bio/Vote History
Giavazzi
Francesco Giavazzi
Bocconi
Strongly Agree
6
Bio/Vote History
Griffith
Rachel Griffith
University of Manchester Did Not Answer Bio/Vote History
Guerrieri
Veronica Guerrieri
Chicago Booth
Agree
7
Bio/Vote History
Guiso
Luigi Guiso
Einaudi Institute for Economics and Finance
Strongly Agree
9
Bio/Vote History
the issue is not the size of budget per se but that it introduces a number of permanent commitments on government expenses
Honohan
Patrick Honohan
Trinity College Dublin
Uncertain
6
Bio/Vote History
But further deterioration in deficit could quickly bring trouble.
Javorcik
Beata Javorcik
University of Oxford
Strongly Agree
9
Bio/Vote History
Kleven
Henrik Kleven
Princeton Did Not Answer Bio/Vote History
Krahnen
Jan Pieter Krahnen
Goethe University Frankfurt
Agree
6
Bio/Vote History
It increasese default probability through its indirect effect on future debt incentives; while the direct effect may be negligible.
Krusell
Per Krusell
Stockholm University
Agree
6
Bio/Vote History
Kőszegi
Botond Kőszegi
Central European University
No Opinion
Bio/Vote History
La Ferrara
Eliana La Ferrara
Harvard Kennedy
Agree
3
Bio/Vote History
Leuz
Christian Leuz
Chicago Booth
Uncertain
2
Bio/Vote History
Deficit was not much above rules, but debt is high & spreads reacted accordingly. Bigger issue may have been budget broke earlier promises.
Mayer
Thierry Mayer
Sciences-Po Did Not Answer Bio/Vote History
Meghir
Costas Meghir
Yale
Agree
8
Bio/Vote History
Neary
Peter Neary
Oxford
Agree
6
Bio/Vote History
The right decision given current rules - which should be changed.
O'Rourke
Kevin O'Rourke
Oxford
Disagree
6
Bio/Vote History
Pagano
Marco Pagano
Università di Napoli Federico II
Strongly Agree
9
Bio/Vote History
Pastor
Lubos Pastor
Chicago Booth
Agree
8
Bio/Vote History
Italy's public debt is uncomfortably large, growth rate uncomfortably low, and monetary policy is in the hands of the ECB.
Persson
Torsten Persson
Stockholm University
Agree
6
Bio/Vote History
Main risk may not be the direct fiscal effects, but the indirect effetcs via a higher interest spreads and defaulting banks.
Pissarides
Christopher Pissarides
London School of Economics and Political Science
Uncertain
7
Bio/Vote History
Depends on the commentary from the European Commission and on the fiscal policies agreed at central policy level
Portes
Richard Portes
London Business School
Disagree
7
Bio/Vote History
Prendergast
Canice Prendergast
Chicago Booth
Agree
7
Bio/Vote History
Reichlin
Lucrezia Reichlin
London Business School
Agree
10
Bio/Vote History
Repullo
Rafael Repullo
CEMFI
Uncertain
6
Bio/Vote History
Rey
Hélène Rey
London Business School
Agree
9
Bio/Vote History
High level of debt. Market dynamics unstable on Italian debt.
Schoar
Antoinette Schoar
MIT Did Not Answer Bio/Vote History
Sturm
Daniel Sturm
London School of Economics
Agree
6
Bio/Vote History
Van Reenen
John Van Reenen
LSE
Agree
6
Bio/Vote History
Vickers
John Vickers
Oxford
Agree
5
Bio/Vote History
See bond yields
Voth
Hans-Joachim Voth
University of Zurich
Strongly Agree
7
Bio/Vote History
Weder di Mauro
Beatrice Weder di Mauro
The Graduate Institute, Geneva
Agree
8
Bio/Vote History
It’s not mainly about debt sustainably but about the risk of a run on the debt.
Whelan
Karl Whelan
University College Dublin
Agree
6
Bio/Vote History
Insolvency risk is driven by loss of market confidence and failure to roll over existing debt. This government is close to provoking this.
Wyplosz
Charles Wyplosz
The Graduate Institute Geneva
Strongly Disagree
1
Bio/Vote History
A few basis points don't matter for a debt that stands at 130% of GDP. The problem is about unfunded liabilities.
Zilibotti
Fabrizio Zilibotti
Yale University
Agree
8
Bio/Vote History

Question C Participant Responses

Participant University Vote Confidence Bio/Vote History
Allen
Franklin Allen
Imperial College London
Disagree
6
Bio/Vote History
France's fiscal situation is still under control. The problem is the effect on the Commission's interaction with Italy.
Antras
Pol Antras
Harvard
Uncertain
5
Bio/Vote History
Besley
Timothy J. Besley
LSE Did Not Answer Bio/Vote History
Blanchard
Olivier Blanchard
Peterson Institute
Strongly Disagree
9
Bio/Vote History
with r less than g, debt dynamics are more favorable than they used to be. Some deficits, when needed, are ok.
Bloom
Nicholas Bloom
Stanford
Agree
3
Bio/Vote History
Blundell
Richard William Blundell
University College London Did Not Answer Bio/Vote History
Bénassy-Quéré
Agnès Bénassy-Quéré
Paris School of Economics
Strongly Disagree
10
Bio/Vote History
Due to double counting the deficit is inflated by 0.9pp and France has no problem of market access. But commitment to adjust necessary.
Carletti
Elena Carletti
Bocconi
Disagree
10
Bio/Vote History
Danthine
Jean-Pierre Danthine
Paris School of Economics
Strongly Disagree
1
Bio/Vote History
De Grauwe
Paul De Grauwe
LSE Did Not Answer Bio/Vote History
Eeckhout
Jan Eeckhout
UPF Barcelona
Disagree
7
Bio/Vote History
Fehr
Ernst Fehr
Universität Zurich Did Not Answer Bio/Vote History
Freixas
Xavier Freixas
Barcelona GSE Did Not Answer Bio/Vote History
Fuchs-Schündeln
Nicola Fuchs-Schündeln
Goethe-Universität Frankfurt Did Not Answer Bio/Vote History
Galí
Jordi Galí
Barcelona GSE
Disagree
7
Bio/Vote History
Not if the increase is transitory. Developments in r, g and pi may dominate the impact of a small increase in the structural deficit
Garicano
Luis Garicano
LSE Did Not Answer Bio/Vote History
Giavazzi
Francesco Giavazzi
Bocconi
Uncertain
5
Bio/Vote History
Griffith
Rachel Griffith
University of Manchester Did Not Answer Bio/Vote History
Guerrieri
Veronica Guerrieri
Chicago Booth
Disagree
7
Bio/Vote History
Guiso
Luigi Guiso
Einaudi Institute for Economics and Finance
Disagree
8
Bio/Vote History
France has still fiscal room, measures are transitory
Honohan
Patrick Honohan
Trinity College Dublin
Disagree
6
Bio/Vote History
But has substantial consequences for future ability of Macron administration to achieve domestic and European reforms...
Javorcik
Beata Javorcik
University of Oxford
Disagree
7
Bio/Vote History
Kleven
Henrik Kleven
Princeton Did Not Answer Bio/Vote History
Krahnen
Jan Pieter Krahnen
Goethe University Frankfurt
Uncertain
5
Bio/Vote History
As in the case of Italy, rule-breaking carries the risk of repetition, although to a lessor extent for France.
Krusell
Per Krusell
Stockholm University
Disagree
4
Bio/Vote History
Kőszegi
Botond Kőszegi
Central European University
No Opinion
Bio/Vote History
La Ferrara
Eliana La Ferrara
Harvard Kennedy
Uncertain
1
Bio/Vote History
Leuz
Christian Leuz
Chicago Booth
Agree
2
Bio/Vote History
Absolute level still low, but rel. increase in spreads is substantial. Main concern is that reason for larger deficit is inability to reform
Mayer
Thierry Mayer
Sciences-Po Did Not Answer Bio/Vote History
Meghir
Costas Meghir
Yale
Disagree
8
Bio/Vote History
Neary
Peter Neary
Oxford
Agree
6
Bio/Vote History
What’s good for Italy ...
O'Rourke
Kevin O'Rourke
Oxford
Disagree
6
Bio/Vote History
Pagano
Marco Pagano
Università di Napoli Federico II
Agree
5
Bio/Vote History
Pastor
Lubos Pastor
Chicago Booth
Disagree
8
Bio/Vote History
increase, yes, but substantially, no.
Persson
Torsten Persson
Stockholm University
Disagree
7
Bio/Vote History
Pissarides
Christopher Pissarides
London School of Economics and Political Science
Disagree
8
Bio/Vote History
France is less at risk than Italy (better finances and debt) and Macron's policies should bring more growth in the medium term
Portes
Richard Portes
London Business School
Strongly Disagree
9
Bio/Vote History
Prendergast
Canice Prendergast
Chicago Booth
Uncertain
7
Bio/Vote History
Reichlin
Lucrezia Reichlin
London Business School
Disagree
8
Bio/Vote History
Repullo
Rafael Repullo
CEMFI
Disagree
6
Bio/Vote History
Rey
Hélène Rey
London Business School
Disagree
9
Bio/Vote History
Structural reforms are done/ being done in France. Level of debt manageable.
Schoar
Antoinette Schoar
MIT Did Not Answer Bio/Vote History
Sturm
Daniel Sturm
London School of Economics
Disagree
6
Bio/Vote History
Van Reenen
John Van Reenen
LSE
Disagree
6
Bio/Vote History
Vickers
John Vickers
Oxford
Disagree
5
Bio/Vote History
Voth
Hans-Joachim Voth
University of Zurich
Uncertain
8
Bio/Vote History
Weder di Mauro
Beatrice Weder di Mauro
The Graduate Institute, Geneva
Disagree
1
Bio/Vote History
Not solvency but the ability of the French government to push reform of the Euro area is immediately at risk.
Whelan
Karl Whelan
University College Dublin
Disagree
7
Bio/Vote History
France has lower debt\GDP and there is far less likelihood of a bond market "strike" on buying French debt. 3 percent is an arbitrary limit.
Wyplosz
Charles Wyplosz
The Graduate Institute Geneva
Strongly Disagree
1
Bio/Vote History
Same observation as for Italy.
Zilibotti
Fabrizio Zilibotti
Yale University
Disagree
6
Bio/Vote History