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473 - National Expenditure Rules – Why, How and When

Author(s): Joaquim Ayuso i Casals

National Expenditure Rules – Why, How and Whenpdf(2 MB) Choose translations of the previous link 

Summary for non-specialistspdf(29 kB) Choose translations of the previous link 

Expenditure rules present a number of features in terms of simplicity, transparency, monitoring and accountability that make them particularly appealing relative to other types of rules and may substantially contribute to an improved fiscal policy making. They also show an appropriate balance between budgetary discipline and macroeconomic stabilization. In turn, they have represented a cornerstone in the fiscal strategy adopted by some EU Member States to sustain successful episodes of fiscal consolidation over the last decades. However, their final effectiveness to promote fiscal discipline depend on a number of design issues such as the appropriate target definition, the time horizon of the rule, the existence of well defined corrective mechanisms, and a suitable coverage both in terms of budgetary items (i.e. spending categories excluded from the coverage) and government layers. Since spending norms only focus on the expenditure side of the budget they need to be supplemented by other types of rules and arrangements (e.g. controls over tax expenditure) to ensure a proper functioning. Last but not least, the design of national spending rules should ensure that government spending developments are in line with the expenditure benchmark included in the reformed SGP and effectively sustain the achievement of the MTOs.

(European Economy. Economic Papers 473. December 2012. Brussels. PDF. Tab. Graph. Ann. Free.)

KC-AI-12-473-EN-N (online)
ISBN 978-92-79-22994-7 (online)
doi: 10.2765/27833 (online)

JEL classification: G23

Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.

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