Volume 52, May/June 2017, Number 3 · pp. 131-137
Fiscal Rules and the Scope for Risk Sharing
The trade-off between risk reduction and risk sharing has been at the heart of debates concerning EU economic governance over the last five years, but there are few signs as yet of a solution being reached. Despite this, there is scope for an obvious grand bargain. Those concerned about irresponsible policy choices, especially where the structure of incentives is open to moral hazard, will want more binding arrangements to tie the hands of the profligate, while those concerned about the adverse impact of restrictive macroeconomic policies want to escape from low-growth traps.
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