Euro Area Fiscal Stance And Its Operationalisation Perspective

Euro area fiscal stance is a useful notion for the purpose of coordination of fiscal policies as countercyclical instruments in times of extremely low interest rates. European Fiscal Board's judgement of the broadly neutral EAFS being appropriate in 2018 was linked with the asymmetry of macro stabilisation policy options created by interest rates bounded at zero. Such neutral stance need not be incompatible with the Stability and Growth Pact. The notes describes main keys along which a desired EAFS can be distributed among Member States and proposes a mechanism utilising Macroeconomic Imbalance Procedure to address Stability and Growth Pact's asymmetry which does not include provisions for over-achieving countries if Euro Area slump calls for a looser fiscal stance.