CEPS Project


Fiscal Rules and Strategies under Externalities and Uncertainties


The project provided new tools for fiscal policy design by incorporating the new EU fiscal rules regarding, e.g. government debt and deficit, into applied models for fiscal policy evaluation. It also investigated spillovers effects and channels of transmission of shocks across countries as well as the degree and channels of risk-sharing in the euro area and compared it to US experience. FIRSTRUN also investigated the political economy of fiscal cooperation, the difficult inter-play between domestic political pressures and EU level priorities as well concerns about legitimacy. The project was organised along 6 Work Packages (WP):

  • WP 1: Fiscal policy coordination and cross country spillover effects. It provided a common conceptual and theoretical framework for all other WPs regarding the various spillover effects that call for policy coordination and the different forms that fiscal coordination can take. This WP also quantified cross country spillover effects in the EU and EMU countries. Finally, WP 1 summarized the results from other WPs and drew policy conclusions based on the results in all other research WPs making sure that the conclusions are consistent with each other.
  • WP 2: Ex ante policy coordination: the new EU fiscal rules. It analysed the functioning of the new fiscal rules by asking how they would have worked in the past. The work addressed the uncertainty related to fiscal forecasts. It also considers feedback mechanisms such as fiscal multipliers.
  • WP 3: A fiscal union for the EMU: Why and which one? This WP considered alternative models of fiscal union for the EMU, which combine different forms of market and fiscal risk sharing mechanisms (e.g. the banking union and eurobonds) and shock absorbers including a European unemployment insurance scheme and a central fiscal capacity.
  • WP 4: Monetary-fiscal policy mix. The WP focused on the interaction between monetary and fiscal policies from the point of view of macro-stabilization.
  • WP 5: Fiscal rules and long-term sustainability. The WP asked the national governments should address the issue of long-term fiscal sustainability taking into account population ageing, uncertainty about the future fiscal pressures, and the new EU debt and deficit limits. This WP also addresses the potential spillover effects from structural reforms that aim at improving long-term fiscal sustainability.
  • WP 6: Governance, institutional mechanisms for fiscal policy coordination and their legitimization. The WP focused on how to assure the legitimacy of the institutional mechanisms for fiscal policy coordination. It developed a new conceptual framework for understanding the practicalities of fiscal coordination and the disciplines it requires of participating governments.

Gilles Thirion

Daniel Gros

Distinguished Fellow

+32 (0)2 229 39 38

Veselina Georgieva

Administrative Coordinator - Economic Policy and Jobs & Skills Unit

+32 (0)2 229 39 78

Cinzia Alcidi

Director of Research

+32 (0)2 229 39 58
Project Meeting is over

The Future of EU Fiscal Governance

Economic and monetary affairs

CEPS Conference Room
Place du Congrès 1 - 1000 Brussels

Participation in this event is exceptionally free of charge.