The Euro crisis: The ‘fiscal compact’ and fiscal policy

This paper, published in January 2012, forms part of a series of working papers on the euro crisis by leading Irish commentators.

The author, Pat McArdle, investigates the implications for fiscal policy of the 'draft international agreement on a reinforced economic union' that was being circulated ahead of the European Council summit on 30 January 2012. 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.