Riders on the storm: EU fiscal policy coordination and the Great Recession

Friday 15th April - Dr Charlotte Rommerskirchen- Edinburgh University/ POLSIS Visiting Fellow

For the first time since the Maastricht Treaty heralded the coordination of macroeconomic policies among European Union Member States, public finances during the Great Recession were collectively focused on stimulus policies. Despite a fierce rhetoric of beggar-thy-neighbour policies, fiscal free-riding was kept at bay. Yet while member states were accusing each other of growth (stimulating ‘too little’) or stability free riding (simulating ‘too much’), they overlocked the dangers associated with second-order free-riding. Without functioning internal incentives towards collective action, member states relied on financial markets to punish wayward members. The costs of this choice have been highly visible since the European Sovereign Debt Crisis erupted in late 2009. Continuing to rely on market discipline to bridle public finances, EU Member States persist in free-riding.  

To listen to the seminar, click here.