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EU Fiscal Rules: Further Reform or Better Implementation?

EU fiscal rules are a highly divisive topic. Although there is a broad consensus that rules are needed to ensure a smooth functioning of the euro area, views very much diverge over the effectiveness of current arrangements and over how and when to move ahead. This paper reviews the debate around the European fiscal framework. It starts with a concise history of the Stability and Growth Pact (SGP) highlighting main trends since inception. Based on a brief assessment of the current state of affairs, the paper outlines options for improvement. It argues in favour of a bargain involving new elements of risk reduction and risk sharing combined with a stronger role for independent institutions.