With its just-published ideas for reforming the European fiscal framework, the European Commission (EC) is taking a step in the right direction. Replacing almost all existing complex rules with a norm for spending that is directly impacted by policymakers represents a drastic simplification and sharpens the accountability of policymakers. Integrating fiscal policy, economic reform, investment plans, and, where applicable, macroeconomic stability into a single policy plan with a medium-term focus can enhance policy coordination. By including country-specific public debt reduction requirements in that multi-year plan, considering the sustainability risks of existing public debt, fiscal consolidation objectives and the strengthening of economic growth potential can, in principle, be reconciled. Thus, tricky issues in the current framework are remediated.
But the new way of working would also create new, complex, and sometimes politically charged discussions, with margin for discretionary decisions. The EC's role in the new policy framework is similar to its role in allocating NextGenerationEU support to member states. The EC consolidates and expands that role, inevitably further increasing its political character, with no proposals to strengthen its democratic legitimacy. There are also no proposals for a larger central budget (fiscal capacity) - a necessary cornerstone for a stable currency union. Thus, the EC’s ideas do not bring the missing link for a fully-fledged, stable currency union. They are a step in the right direction, but certainly not the final step.