The EU’s fiscal regime, the Stability and Growth Pact, has been strengthened. 25 EU Member States have signed the fiscal compact, which commits countries to enshrining important fiscal rules in binding national legislation. The fiscal compact is an important step towards a fiscal union in the euro area. Its timely ratification is now key. A real innovation is the Macroeconomic Imbalances Procedure.
It will help to detect and correct economic imbalances, for instance in house price developments. This should avoid situations like in Ireland, where a bursting housing bubble, together with bank guarantees provided by the state, led to an abrupt fiscal deterioration. More legislative acts are under way to further increase the surveillance of national economic policies.