05 Nov 2014

The case of the disappearing Fiscal Compact

Daniel Gros / Cinzia Alcidi

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Following the Commission’s autumn forecast showing that only five euro-area countries exhibit a fiscal balance better than the 0.5% of GDP deficit allowed by the Fiscal Compact, Daniel Gros and Cinzia Alcidi attempt to explain in this new Commentary why there is precious little policy debate over these flagrant treaty violations. They find that it is not possible to put fiscal policy in a legal straightjacket and that the tight rules enshrined in the new Treaty and in national constitutions are discarded as soon as they become politically inconvenient.

Daniel Gros is Director of CEPS. Cinzia Alcidi is LUISS Research Fellow at CEPS and Head of the Economic Policy research unit.