Macroeconomic policy developments: fiscal policy and public debt

A new framework for fiscal policycoordination is needed

The fiscal policy stance is expected to be broadly neutral (that is, neither expanding nor contracting) in 2018 but nevertheless somewhat more expansionary than in 2017 in both the euro area and the EU (see Figure 1.21). This fiscal stance follows a couple of years of moderate expansion in the euro area and a contraction in the EU in 2016, as well as the arguably misguided fiscal austerity from 2010 to 2013 in the EU, and to 2014 in the euro area. As output growth is expected to slow down from 2018 onwards, the aggregate fiscal stance in both the euro area and the EU are projected to become more expansionary. For 2018, the fiscal stance of most Member States is expected to have been on the expansionary side, with the exception of Germany, Estonia,Cyprus and the UK (see figure 1.22). This is a switch from 2017 when most Member States consolidated their public finances, except for Germany, Estonia, Greece, Italy,Cyprus, Latvia, Hungary, Poland and Romania.

more information in Benchmarking Working Europe 2019 chapter 1 'Macroeconomic developments in Europe: tackling the growth, inequality and climate change challenges'