Oeconomica Jadertina, Vol. 15 No. 1, 2025.
Preliminary communication
https://doi.org/10.15291/oec.4662
Consequences of the deactivation of the European Union’s fiscal rules and their reinstatement
Andraž Konc
orcid.org/0009-0000-5064-8153
; School of Advanced Social Studies, Slovenia
Abstract
Thearticle examines the deactivation and subsequent reinstatement of the European Union's fiscal rules in response to the COVID-19 pandemic and its aftermath. It evaluates the macroeconomic and fiscal consequences of suspended fiscal rules and their role in addressing unprecedented economic challenges. A review-based methodology is employed, utilizing secondary data from authoritative sources, including the European Commission and Eurostat. This study also employs a Monte Carlo-based assessment of Slovenia’s debt sustainability.The findings reveal that suspending fiscal rules enabled EU Member States to implement expansive fiscal measures, mitigating the pandemic's economic impact but significantly increasing public debt levels. Despite these interventions, disparities in fiscalresponses and outcomes among Member States persist. We also highlight the challenges of reinstating fiscal rules amidst high debt levels and evolving economic conditions, emphasizing the need for flexibility and tailored approaches. The results indicate that while Slovenia’s debt is expected to remain on a sustainable path, external shocks, ageing costs, and prolonged low growth could alter this trajectory. Limitations include the reliance on aggregate data and a lack of primary empirical evidence. Recommendations include improving fiscal governance frameworks to balance sustainability with flexibility and enhancing compliance mechanisms for Member States.
Keywords
EU fiscal rules, COVID-19 pandemic, fiscal policy, economic governance, public debt sustainability
Hrčak ID:
332519
URI
Publication date:
1.6.2025.
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