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European Public Policies and Sovereign Risk in the Eurozone: How State-Contingent Governance Hampers Fiscal Discipline

  • Ad van Riet ORCID logo EMAIL logo
Published/Copyright: June 21, 2023
The Economists’ Voice
From the journal The Economists’ Voice Volume 20 Issue 2

Abstract

The 30 years old Maastricht Treaty on European Union (EU) is based on the political vision that a stable euro requires sound budgetary policies and sustainable public finances in all the participating countries. This article reviews how the European framework for managing sovereign risk in the Economic and Monetary Union (EMU) has evolved in challenging times. The main finding is that over the years European policymakers have applied a range of special provisions contingent on the state of national economies, the demand for public investment, the need for a sound financial system, the effectiveness of monetary transmission, or on general concerns with the integrity of the eurozone, in a way which hampers fiscal discipline. The growing prominence of this state-contingent governance could mark the political transition from the Maastricht Treaty’s focus on public risk reduction to a ‘Next Generation EMU’ which favours public risk sharing. The challenge in designing the future EMU architecture will be to balance the need to preserve the integrity of eurozone with the need for fiscal discipline.

Keywords: Economic and Monetary Union; fiscal discipline; Maastricht Treaty; sovereign risk; state-contingent public policies
JEL Classification: E5; F36; F45; G28; H6
Corresponding author: Ad van Riet, United Nations University-Institute on Comparative Regional Integration Studies, 8000, Bruges, Belgium, E-mail:
Associate Research Fellow at the United Nations University-Institute on Comparative Regional Integration Studies (UNU-CRIS), Bruges, Belgium. The views expressed in this article are those of the author and should not be reported as representing an official position of UNU-CRIS.

Acknowledgements

An earlier version of this article was presented at the 11th Biennial Conference of the ECPR Standing Group on the European Union, LUISS University, Rome, 8–10 June 2022, and at the Conference on the 30th Anniversary of the Maastricht Treaty, Maastricht University and Studio Europa Maastricht, 28–29 September 2022. Comments from Lukas Spielberger, conference participants and two anonymous reviewers are gratefully acknowledged.

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Received: 2023-03-16
Accepted: 2023-06-02
Published Online: 2023-06-21

© 2023 Walter de Gruyter GmbH, Berlin/Boston

Articles in the same Issue

  1. Frontmatter
  2. Editorial
  3. The Economists’ Voice, December Issue 2023, Geopolitical Tensions and Economic Policy Making
  4. Policy Papers
  5. European Public Policies and Sovereign Risk in the Eurozone: How State-Contingent Governance Hampers Fiscal Discipline
  6. The Reform of the European Fiscal Rules: In Search of Mechanisms Ensuring Sustainable Debt Levels
  7. How Brexit Damaged the United Kingdom and the City of London
  8. Understanding Economic Sanctions on Iran: A Survey
  9. A Soufflé only Rises Once: China’s Grim Economic Prospects
  10. Policy Forum: Geopolitical Tensions and Deglobalization
  11. Deglobalization: Reasons and Effects
  12. Geopolitical Tensions and Global Monetary (Dis)Order
  13. From BRICS to BRICS+: Sheer More Members is not a Challenge to G7
  14. The Rise and Fall of the Eurasian Regionalism
  15. Caught up by Geopolitics: Sanctions and the EU’s Response to Russia’s War Against Ukraine
  16. China’s Central Role in the Globalization and Slowbalization Trends
  17. German Chinese Economic Relations: Necessary Reassessment
  18. China’s Economy as Xi’s Means of Power Or Why the Chinese Economy is Not yet Bigger than That of the USA
  19. Systemic Rivalry of China and the West in Climate Policy
https://doi.org/10.1515/ev-2023-0013
Keywords for this article
Economic and Monetary Union; fiscal discipline; Maastricht Treaty; sovereign risk; state-contingent public policies

Articles in the same Issue

  1. Frontmatter
  2. Editorial
  3. The Economists’ Voice, December Issue 2023, Geopolitical Tensions and Economic Policy Making
  4. Policy Papers
  5. European Public Policies and Sovereign Risk in the Eurozone: How State-Contingent Governance Hampers Fiscal Discipline
  6. The Reform of the European Fiscal Rules: In Search of Mechanisms Ensuring Sustainable Debt Levels
  7. How Brexit Damaged the United Kingdom and the City of London
  8. Understanding Economic Sanctions on Iran: A Survey
  9. A Soufflé only Rises Once: China’s Grim Economic Prospects
  10. Policy Forum: Geopolitical Tensions and Deglobalization
  11. Deglobalization: Reasons and Effects
  12. Geopolitical Tensions and Global Monetary (Dis)Order
  13. From BRICS to BRICS+: Sheer More Members is not a Challenge to G7
  14. The Rise and Fall of the Eurasian Regionalism
  15. Caught up by Geopolitics: Sanctions and the EU’s Response to Russia’s War Against Ukraine
  16. China’s Central Role in the Globalization and Slowbalization Trends
  17. German Chinese Economic Relations: Necessary Reassessment
  18. China’s Economy as Xi’s Means of Power Or Why the Chinese Economy is Not yet Bigger than That of the USA
  19. Systemic Rivalry of China and the West in Climate Policy
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