Fiscal Framework Changes in European Monetary Union Before and After Sovereign Debt Crisis

Abstract

The most important element holding possibility to destroy stability in monetary unions is fiscal policies left under monopoly of countries. There have been debt and public finance policies conducted by member states causing sovereign debt crisis triggered by Global Crunch in Eurozone. Therefore, fiscal framework of European Monetary Union is examined in the study. Fiscal rules adopted by Treaty of Maastricht being the founding charter of European Union and additional measures taken due to hinder experienced are assessed besides theoretical foundations of fiscal policies recommended for Monetary Unions. During analysis of the process, it is remarkable that both such rules and measures taken afterwards have followed each other however, that radical changes have not actually occurred. Only restrictions to national policies have been used instead of common policies in the fiscal field to prevent Eurozone member states to deprive fiscal policies: the only tool, which may be used to handle asymmetrical shocks. However, it is observed that sanctions on the implementation of rules adopted for the fiscal field have always been weak and could, from time to time, easily be broken despite the fact that such rules are qualified as binding.