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Baltic Journal of European Studies

Tallinn Law School, Department of Law, School of Business and Governance, Tallinn University of Technology

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Enhanced Fiscal Governance in the European Union: The Fiscal Compact

Merike Kukk / Karsten Staehr
Published Online: 2015-02-01 | DOI: https://doi.org/10.1515/bjes-2015-0006


Several reforms aiming to strengthen budgetary discipline in the European Union have been implemented since the outbreak of the European debt crisis. Arguably the most important one is the Fiscal Compact, which stipulates that each signatory country must enshrine in domestic legislation an upper limit on the structural budget deficit, that is, the deficit after cyclical and other temporary factors have been excluded. This paper analyses the contents of the Fiscal Compact and discusses challenges for its implementation and efficacy. The conclusion is that the Fiscal Compact may be challenging to implement and enforce because the rules are very complex and require complicated calculations that are subject to very large forecasting uncertainty. The Fiscal Compact could, however, lead to a stronger national commitment to fiscal prudence.

Keywords: cyclical adjustment; European Union; Fiscal Compact; fiscal rules


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About the article

Published Online: 2015-02-01

Citation Information: Baltic Journal of European Studies, Volume 5, Issue 1, Pages 73–92, ISSN (Online) 2228-0596, DOI: https://doi.org/10.1515/bjes-2015-0006.

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© 2015 Merike Kukk and Karsten Staehr. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License. BY-NC-ND 3.0

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