The Euro Crisis: The ‘Fiscal Compact’ and Fiscal Policy

Written by Pat McArdle.

Mr McArdle investigates the implications for fiscal policy of the ‘draft international agreement on a reinforced economic union’ that is being circulated ahead of the European Council summit on 30 January.

His analysis focuses in particular on the proposal for a ‘balanced budget rule’ to be embedded into national legal frameworks, preferably at constitutional level. He notes that modelling and predicting structural deficits is a difficult task and embedding such a rule is likely to prove problematic.

Pat McArdle is the Co-Chairman of the IIEA’s Economists Group and is a former Chief Economist with Ulster Bank. He has previously worked as an Advisor to the Independent Review Panel on the Irish Department of Finance, as a columnist with the Irish Times on economic and financial matters, as the Irish representative on the Economic and Monetary Affairs Committee of the European Banking Federation (EBF), and as an Economist with the Department of Finance. He has also worked extensively with the European Commission and other European institutions throughout his career.

This paper forms part of a series of working papers on the euro crisis by leading Irish commentators.