Thread by @SDullien

The @EU_EESC has just published a study by @repasi, @chris_ptz, @AndrewWattEU, Sebastian Watzka and me on the economics and legal issues of changing EU #fiscal rules.
Our conclusions: Quite sweeping changes are possible without treaty change. A Thread. 1/
eesc.europa.eu/en/our-work/pu…

In the study, we look at different reform proposals for the fiscal rules (including that of the the @EFB_EU), dissect them into the different elements and evaluate the legal and economic issues surrounding the elements. 2/

The specific elements are: Moving towards an expenditure rule (with the detailed questions of benchmarks, investment clauses and the escape clause as well as adjustment speed), the change in the debt anchor and the adjustment towards it as well 3/

as fiscal standards as @ojblanchardq and @jzettelmeyer have proposed. 4/

Our conclusions in brief: Economically, many of the reform proposals would be a clear improvement over the current status quo (maybe not overly surprising for most economists who have worked on the issue of EU fiscal rules). 5/

For me, more of a surprise was, that legally, you can change a lot of the fiscal rules without a treaty change. In fact, most of the fiscal rules are secondary EU law and can be changed by qualified majority. 6/

(Here, those countries usually seen as the “frugals” do not have a blocking minority if Germany would vote for a change.
For those who want to give it a try, go here: consilium.europa.eu/de/council-eu/… )7/

Moreover, the fiscal compact (despite its nature as a multilateral treaty) is legally subordinate to EU secondary legislation. If EU secondary legislation were to be changed in a way that conflicts with the compact, the compact would not be applied anymore. 8/

So moving towards an expenditure rule with carve-out for investments and escape clauses and significantly lengthening the adjustment speed towards the debt anchor could be (relatively) easily done. 9/

Moving towards fiscal standards was evaluated more critically from a legal point of view, as they interfer more with the budget rights of national parliaments. 10/

And: One rule cannot be changed with simple secondary legislation: The criterion of excessive deficits of more than 3 % of GDP which needs to be prevented. So, not all is fair game, but the other rules need to calibrated with this in mind. 11/

(Btw: The 3 %-threshold could also be changed without a treaty change, but with a specific voting procedure laid out in the treaty which would require unaninimity.) 12/

Thanks to the great team and especially @repasi from whom I have learned a lot for this very constructive collaboration! 13/

CC @jakob_eu @AchimTruger @W_Schmidt_ @WolfgangProissl @florian_toncar @c_lindner @Otto_Fricke @sven_giegold @GuntramWolff @Mfratzscher @agnesbq1 @MonikaSchnitzer @FuestClemens @Alex_J_Thiele @pisaniferry @PhilippaSigl @ThomasPHI2 @UdoPhilipp @mischrodi /END