fiscal policy making:
Firstly, Member States have been increasingly relying on fiscal rules over the past twenty years, and
point to the existence of a link between these fiscal arrangements and budgetary outcomes.
- Budgetary positions tend to improve in the years following the introduction of fiscal rules and
primary government expenditures tend to grow less in the years following the introduction of
expenditure rules. - The characteristics of rules may influence fiscal developments. Rules enshrined in law or
constitution and foreseeing automatic enforcement mechanisms seem to have a larger influence on
budgetary outcomes. - However, this does not prevent other "softer" arrangements based on political agreements or
commitments from being effective in improving the conduct of fiscal policy (e.g. fiscal rules
applied to central government in Finland). - It also follows from the analysis that expenditure rules capping spending growth over the medium
term and revenue rules determining ex ante the allocation of revenue windfalls may contribute to
governments' commitment to avoid pro-cyclical policies in good times (e.g. fiscal rules in the
Netherlands). In this respect, only a few rules currently in force are defined in cyclically-adjusted
terms (e.g. budget balance rule for the general government in Sweden). - However, there are other instruments that help address pro-cyclicality such as medium-term
frameworks for budgetary planning. For instance, rules incorporated into medium- term budgetary
frameworks, as a part of a comprehensive fiscal strategy, may be better adapted to economic and
country specific circumstances while making stabilisation and sustainability objectives more
compatible (e.g. Denmark). - In addition, a multi annual rule could be considered superior to a rule that only sets a target for one
year. Rules covering a medium term horizon could make circumvention more difficult and,
therefore, reinforce credibility and prospects of fulfilment. In this respect, the coverage and escape
clauses of the rule must be clearly defined in order to avoid arbitrary circumventions. - Finally, in a number of Member States fiscal rules prove to be instrumental in promoting an
appropriate budgetary coordination among general government tiers to maintain sound fiscal
positions (e.g. Spain).
Secondly, a number of interesting facts emerges from the Commission analysis of fiscal institutions.
- The involvement of such independent institutions in the budget process appears to be an important
element determining its influence on the fiscal decision-making. Different arrangements currently
in place in some EU countries have proved to be effective in conveying the policy messages issued
by these independent bodies. - The most widespread options consist of regular hearings by the Parliament, consultation by the
government in the course of the budgetary process, or the obligation of the fiscal authorities to
justify departures from the forecasts or recommendations released by the institution (e.g. the
Institute of Economic Research (WIFO) in Austria). - According to some Member States' experiences, delegation of forecasting tasks for the preparation
of the budget seems to help address possible optimistic biases in macroeconomic projections (e.g.
the National Accounts Institute in Belgium). The existence of independent national advisory
bodies and research institutes, through a higher degree of competition, may also contribute to
eliminate biases in macroeconomic projections of national governments. - Next, the institutions in place seem to have a considerable impact on the public debate as most of
them enjoy a considerable reputation, which appears to be essential for exerting real influence on
policy decisions.