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<p>In the late 1990s, the EU adopted common fiscal rules to keep national public finances on a sustainable path and allow centralised monetary policy to effectively implement its mandate. After the global financial crisis, when public investment posted a particularly sharp decline, the same fiscal rules were seen as culprits. This paper takes a fresh look at the interplay between public investment and EU fiscal rules. Using a new database covering all EU countries from 1998 to 2023, our analysis shows that compliance with the commonly agreed fiscal rules is not the problem. On the contrary, governments who follow the rules have the space to spend on investment. Policy makers tend to sacrifice public investment expenditure when they face trade-offs within the more general constraints on public finances.</p>

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Comply and invest: the effect of EU fiscal rules on public investment

  • 期刊论文

  • 发表日期：

    2025年7月23日

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  • Martin Larch,
  • Wouter van der Wielen

摘要

In the late 1990s, the EU adopted common fiscal rules to keep national public finances on a sustainable path and allow centralised monetary policy to effectively implement its mandate. After the global financial crisis, when public investment posted a particularly sharp decline, the same fiscal rules were seen as culprits. This paper takes a fresh look at the interplay between public investment and EU fiscal rules. Using a new database covering all EU countries from 1998 to 2023, our analysis shows that compliance with the commonly agreed fiscal rules is not the problem. On the contrary, governments who follow the rules have the space to spend on investment. Policy makers tend to sacrifice public investment expenditure when they face trade-offs within the more general constraints on public finances.