European economic, fiscal, and social policy at the crossroads

Abstract

In the last decade or more, the European Union has faced a number of challenges, such as the divergence of per capita income after the global financial crisis and the ensuing great recession of 2007-9, the sovereign debt crisis of 2010-12, banking failures, and the creation of an incomplete banking union, a long period of a "near-debt deflation," divisive euro-wide reactions to the immigration crisis (2015/6), the challenges to enact proper policies against climate change, the divergent political trends since the great recession of 2007/9, and now the Covid-19 pandemic-driven recession and its long-run economic and health impacts. Already before and after the great recession many plans for reforms, institutions, and policies were suggested to overcome and manage those challenges. We will focus on plans to reform the fiscal architecture of the EMU, but we will also argue that the chosen institutional arrangements will have a significant impact on a sustainable Social Europe. Yet, how a sustainable Social Europe will arise depends also on how the pandemic recession will be managed on a Euro-wide level. Some of the aspects discussed here are echoed by political parties having competed with European platforms for the European election. Fiscal governance reform, Social Europe, climate concerns, and immigration issues have been essential core parts of most political party platforms. We will discuss and evaluate recent proposals, in particular, on fiscal reforms as well as some aspects of new pillars for a Social Europe. We will try to assess which of these comes closer to attaining the triple objective of (a) helping to dampen cyclical divergence, (b) providing fiscal and social buffers, and (c) avoiding national self-interests and promoting joint European goals. Designing a proper monetary, fiscal and social policy may provide the opportunity for a sustainable EU recovery from the current pandemic-driven downturn. Yet the challenges and road blocks are still numerous. 2 MAJOR RECENT CHALLENGES If one thinks about the major structural fiscal challenges facing the EU that need to be managed through policy responses or reforms a major one is fiscal reform. The EU is a monetary union, but not a fiscal and (complete) banking

Crowding-out effect between income policies and public services budgets in OECD countries

“…Noel (2019) mentions, however, that there is little empirical research on income policies, which are, to some extent, neglected by welfare state scholars. In existing studies, some results oppose the importance of public investment in income policies (Khoma & Vdovychyn, 2020;Martinelli, 2020;Saraceno et al, 2020;Wispelaere & Stirton, 2017).…”

Efeito crowding-out (exclusão) entre orçamentos de políticas de renda e serviços públicos em países da OCDE

“…Noel (2019) retrata, todavia, que são escassas pesquisas empíricas sobre políticas de renda, as quais são, em certa medida, negligenciadas pelos estudiosos do Estado de bem-estar social. Nos trabalhos existentes, ademais, verificam-se resultados que se opõem sobre a importância do investimento público em políticas de renda (Khoma & Vdovychyn, 2020;Martinelli, 2020;Saraceno et al, 2020;Wispelaere & Stirton, 2017).…”