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Wednesday, May 25th, 2011

Improving the long-term fiscal outlook
posted by Ross Dawkins


The Pact for the Euro requires concrete yearly commitments towards shared goals of fiscal sustainability and enhanced macroeconomic performance. 
Now, I assume that the euro is here to stay (this is, of course, a separate consideration to who its constituent members are). It strikes me that the annual commitments described in the Pact imply a better quality and more transparent discourse in at least some Eurozone countries on these topics than has been typical so far (I think this is very clearly implied by the situation that at least some of those countries are in).
So if a country is to stay with the euro, how is to achieve this and to embed these commitments in the national democratic process?
One idea that I like is the work by the CPB Netherlands Bureau for Economic Policy Analysis. The CPB reports on the economic impact of the manifestos of Dutch political parties every election. The discussion includes the implications for the public finances (including sustainability), macroeconomic impacts and any proposals in education, science and innovation policy.  The Dutch economy is doing ok and the fiscal position is comfortable - the CPB's work is only one contributor, of course, but I suspect that it's an important institutional development nevertheless.
Inevitably, Dutch political manifestoes remain (like the Pirates of the Caribbean Pirates’ Code and political manifestos everywhere) guidelines rather than rules since events will always override plans. Nevertheless, this form of analysis should be a useful tool in heightening discourse on economic matters. An example of the CPB's work (on the 2006 election) is here.

The CPB is an independent body (albeit within a Government ministry) and its work is highly respected in the Netherlands. Can other Eurozone members find or found equivalents?