The social cost of the 'Excessive Deficit Procedure'

• Robert Schuman Centre for Advanced Studies

Join Matilde Ceron as she discusses her recent research on the social cost of the Excessive Deficit Procedure.

Within the Economic and Monetary Union, the Stability and Growth Pact constrains domestic fiscal policies to promote discipline and prevent spillovers. As a result, the EU fiscal framework limits national deficits while – in principle – leaving the Member States free to decide how to comply with the supranational fiscal rule. However, the EU fiscal framework has been criticised in the crisis and its aftermath for destabilising national welfare states through austerity policies. The analysis addresses this contradiction by assessing whether the EU fiscal rule pressures toward the compression of domestic social spending among the panel of the EU28 from 1995 to 2018. Results confirm that countries exhibiting excessive deficits consolidate substantially their social protection spending. The constraint on domestic budgets is the sharpest during the crisis indicating that the Excessive Deficit Procedure is procyclical and questioning its social sustainability. Findings probe the effectiveness of the socialisation of the EU fiscal framework within the European Semester, indicating the detrimental impact of discipline on social policies remains in the tail end years of the analysis.

This seminar is in-person only.