Liberalism in Crisis?

Liberalism in Crisis?

European Economic Governance in the Age of Turbulence

Edited by Carlo Secchi and Antonio Villafranca

During the current economic crisis recurring questions on the validity of the liberal economic system have resurfaced concerning the role of the state and the free market, the proactive use of fiscal policies, economic nationalism, and environmental sustainability. However, due to the depth and scope of the crisis new emphasis is being placed on these issues. This book attaches great importance to the specific consequences for the European Union by addressing critical themes surrounding its role in the new era of global economic governance. These include the coherence of common monetary policy with national fiscal policies, new financial regulation and supervision, and the future sustainability of national rescue plans and their compatibility with ambitious targets, such as those addressing climate change.

Chapter 5: EU Fiscal Policy in the Age of Turbulence: Will the Lisbon Strategy Survive It?

Carlo Altomonte, Francesco Passarelli and Carlo Secchi

Subjects: economics and finance, international economics


Carlo Altomonte, Francesco Passarelli and Carlo Secchi ‘Exceptional times call for exceptional measures’. These are the words used by the EU Commission President in November 2008 to launch a comprehensive plan to drive Europe’s recovery from the economic crisis. The ‘Recovery Plan’, as it has been called, is the largest coordinated manoeuvre of countercyclical fiscal policy attempted at the EU level. In fact, overall the Plan calls for a fiscal stimulus of more than €200 billion or 1.5 per cent of EU GDP (Gross Domestic Product), to be mobilised within national budgets (in excess of €170 billion, 1.2 per cent of GDP) and EU and European Investment Bank budgets (around €30 billion, 0.3 per cent of GDP). In the short term, the plan calls for measures to boost demand, save jobs and help restore confidence. In terms of the centralised EU’s contribution to the Plan, that comes from accelerating payments of up to €6.3 billion under the structural and social funds within the EU Budget. In particular, the Commission has simplified the criteria for the use of the European Social Fund, re-programmed some spending and stepped up advance payments from early 2009, so that member states have earlier access to up to €1.8 billion in order to reinforce active labour market policies, and where necessary opt for full Community financing of projects during this period. Up to €4.5 billion of cohesion funding is being brought forward, alongside other measures to accelerate the implementation of major investment projects. The Commission is...

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