Second, we need to ensure that the EU fiscal framework delivers on its main objective: preserving fiscal sustainability while allowing room for automatic fiscal stabilisation. This is essential to help stabilise the euro area in the face of large shocks without having to rely excessively on the ECB’s policies. Sound national fiscal policies should remain the basis.
Simpler and more credible fiscal rules would help ensure that euro area countries build adequate fiscal buffers in good times so that fiscal policy can be used in bad times. The euro area budgetary instrument currently under discussion is a welcome step to support competitiveness and convergence, but it is not designed to fulfil a stabilisation function.