What is fiscal governance?
National fiscal governance, or domestic fiscal frameworks, can be defined as those rules, regulations and procedures that influence how budgetary policy is planned, approved, carried out, monitored and evaluated. This includes particularly:
Why is fiscal governance important?
How can sound and sustainable public finances be ensured? In practice, public debt-to-GDP ratios across many EU Member countries have followed an upward trend since mid-1970s, implying a growing burden on future generations. Recently, the fiscal impact stemming from the financial and economic crisis has further increased debt ratios, thereby intensifying the need for fiscal consolidation in view of ageing population. Policy experiences show that strong fiscal governance is an important factor for fiscal performance insofar as it can help contain the deficit bias of fiscal policy making, which was frequently observed across EU Member countries over the past decades. This has been acknowledged by the European Council which in the reform of the Stability and Growth Pact in 2005 asked EU Member countries to strengthen their domestic fiscal governance through fiscal rules and institutions. Moreover, national fiscal frameworks were further reinforced following the adoption of ground-breaking EU legal requirements such as the Budgetary Frameworks Directive, the Fiscal Compact and the Two-Pack.
This database, maintained by the Directorate General for Economic and Financial Affairs, provides detailed information about the EU Member countries' fiscal governance arrangements and their evolution from 1990 to date.
What is the objective of fiscal governance?
Fiscal governance has several objectives:
- attaining sound budgetary positions in particular by containing the deficit bias, i.e. tackling the tendency to conduct unsustainable fiscal policies giving rise to high deficits and increasing debt ratios,
- reducing the cyclicality of fiscal policy making and
- improving the efficiency of public spending.
The containment of the deficit and pro cyclical biases can be achieved, for example, by constraining the behaviour of policy makers and promoting a more long-term oriented fiscal planning. This helps avoid the short-term approach typically associated to political cycles while alleviating the common pool problem.
Sound fiscal governance also fosters better coordination among the various government layers, particularly in those highly decentralised countries.
Finally, fiscal governance may support the efficient use of public resources by monitoring the efficiency of public spending programmes and linking resource allocation to performance.
What information will you find here?
You will find detailed qualitative information and data on the main elements of domestic fiscal frameworks (i.e. numerical fiscal rules, independent public institutions and medium term budgetary frameworks) as well as indices on the strength and quality of fiscal rules and MTBFs developed by the Directorate General for Economic and Financial Affairs. Following the April 2009 ECOFIN Council conclusions, the database is updated annually, with 2017 being the most recent update. The information has been collected through surveys coordinated by the Commission services and channelled through the Alternates of the Economic and Financial Committee (since 2015), the Economic Policy Committee (2009 – 2014), and the EPC Working Group on the Quality of Public Finances (2006 and 2008) respectively. The questionnaires are filled in by the relevant national authorities in the Member countries and the information is carefully processed and made publicly available by the Commission services.