FISCAL RULES AS AN INSTRUMENT FOR STRENGTHENING ECONOMIC STABILITY AND FISCAL SOVEREIGNTY IN EUROPEAN COUNTRIES
Abstract
Pirnykoza P.V. FISCAL RULES AS AN INSTRUMENT FOR STRENGTHENING ECONOMIC STABILITY AND FISCAL SOVEREIGNTY IN EUROPEAN COUNTRIES
Purpose. This study examines fiscal rules as an instrument for ensuring economic stability and fiscal sovereignty in European countries, considering challenges related to their effectiveness, compliance, and impact on debt sustainability.
Methodology of research. The study employs a comprehensive approach that includes the abstract and logical method for analysing the theoretical foundations of fiscal rules, the comparative analysis method to assess the impact of fiscal constraints on macroeconomic stability in different European countries, and the graphical method for visualizing key trends in debt sustainability and budgetary discipline.
Findings. It has been established that fiscal rules play a crucial role in maintaining financial stability by preventing excessive debt accumulation and reinforcing budgetary discipline. The analysis of European experience highlights the advantages of strict fiscal constraints implemented in Germany, Poland, and the Netherlands, as well as the difficulties associated with their enforcement in highly indebted countries such as Italy, France and Spain.
The study identifies the pro-cyclicality of traditional fiscal rules, which restricts governments’ ability to implement counter-cyclical policies. The introduction of a new fiscal constraints model in the EU, based on net expenditure control and debt sustainability analysis, addresses these challenges; however, its effectiveness remains a subject of debate.
Originality. The study expands the approach to analysing fiscal rules through the lens of fiscal sovereignty of states. It identifies key factors influencing the effectiveness of fiscal constraints in EU countries, particularly by examining their pro-cyclicality, impact on debt sustainability, and budgetary discipline. A new EU fiscal regulation model, based on net expenditure control and debt sustainability assessment, was explored and its potential advantages and risks for the economic stability of member states were determined.
Practical value. The findings of this study can be applied to improve budget planning mechanisms and public finance control in both EU countries and Ukraine. The proposed conclusions on the effectiveness of different fiscal rule models can be considered in developing national budget policy strategies, particularly in times of crisis. The analysis of the adaptability of the new EU fiscal regulation system enables an assessment of its potential for enhancing macroeconomic stability and determining the optimal level of flexibility of fiscal norms.
Key words: fiscal rules, debt sustainability, economic stability, budget deficit, fiscal sovereignty, European Union, public debt.
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References
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