Fiscal consolidation was not, however, the result of formal fiscal rules.

And for that, you need fiscal rules.

But not all fiscal rules are created equal.

Countries that want to use them must follow strict fiscal rules.

Germany s binding fiscal rules set a positive example for other eurozone countries.

Eurobonds plus fiscal rules this formula is the euro s best hope for salvation.

Eurobonds plus fiscal rules this formula is the euro s best hope for salvation.

Everyone understood that a monetary union would require enforceable fiscal and banking rules.

This is why Germany decided in 2009 to enshrine strict fiscal rules in its constitution.

The Germans pressed for clearly defined fiscal rules, but other countries wanted more wiggle room.

Sweden and Chile are almost poles apart geographically, but both have used sophisticated fiscal rules successfully.

Third, they cite treaty related and constitutional difficulties in establishing rules and procedures that would simulate a fiscal union.

The fiscal rules, later elaborated into the Stability and Growth Pact, are in themselves elements of a political union.

This would ensure both fiscal stability and fiscal innovation in contrast to the present situation, in which no one obeyed any rules and, when crisis erupted, taxpayers had to come to the rescue.

This raises the old question about whether a currency union can work without a fiscal union, or at least stronger and more binding fiscal rules (the Maastricht deficit commitments are too easily breached).

Nevertheless, fiscal rules and common banking supervision are still regarded in many quarters as an illegitimate encroachment on member states sovereignty.

Later, Maurice Obstfeld pointed out that, in addition to fiscal transfers, a currency union needs clearly defined rules for the lender of last resort.

Merkel argues that it is against the rules to use the European Central Bank to solve eurozone countries fiscal problems and she is right.

The next most important strategy that the panel identified better fiscal rules may not seem sexy, but it is attractive because it effectively costs nothing.

Indeed, the adoption of fiscal rules was seen as a necessary substitute for the harsh discipline that financial markets had previously exercised over EU countries.

While 25 of the EU s 27 governments agreed to the fiscal compact, aimed at imposing fiscal discipline on member states, there is no guarantee that governments will not violate the rules, just as they violated those established by the Maastricht Treaty.

As long as enforcement of fiscal discipline is entrusted to an intergovernmental body, the problem is bound to reappear, limiting the credibility of common budgetary rules.

In particular, northern Europe continues to interpret the crisis as having resulted primarily from a failure to enforce existing rules, especially the EU s fiscal stability criteria.

So he or she might advocate making the central bank independent in order to reduce political meddling, and changing the framework for managing fiscal policy setting up fiscal rules, for example, or allowing only an up or down legislative vote on budget proposals.

The countries that faced similar problems in other parts of the world always combined fiscal contractions with currency devaluations, which membership in a monetary union rules out.

If the current EU budget rules are too rigid and are ignored in the face of a shock, then the door is open for imprudent fiscal behavior.

There would be a fiscal treaty, which would reinforce the Stability and Growth Pact and, importantly, entail automatic sanctions to ensure that eurozone members stick to those rules.

Some, like stronger fiscal rules and closer surveillance of policies affecting competitiveness, might help to head off some future crisis, but they will do nothing to resolve this one.

First, the committee explicitly discussed whether the capital market would suffice to impose fiscal discipline on the currency union s members, and agreed that a system of rules was needed.

Sweden and Chile are almost poles apart geographically, but both have used sophisticated fiscal rules successfully. Chile sets a target for its cyclically adjusted fiscal balance that is, the balance that emerges after accounting for the deviations in commodity prices and domestic output from their trends.

Fiscal consolidation was put on hold (although some did occur, owing to the balanced budget rules of most US states), and monetary policy was geared toward flattening the yield curve.

Indeed, I consider the EFSF to be a stopgap measure while we remedy the fundamental shortcomings of the Stability and Growth Pact, whose fiscal rules lack both substantive and formal bite.

Governments may sign treaties and make solemn commitments to subordinate their fiscal policy to EU rules (or to be more precise, to the wishes of Germany and the European Central Bank).

Once the monetary rules of the game incorporate the real exchange rate, and assuming that fiscal policy remains supportive, investors can look forward to a less volatile and more competitive currency.

Meanwhile, the state lurches from fiscal tragedy to fiscal farce.

Last week, the government of Germany once the most fiscally prudent and disciplined EU country broke the pact s rules for fiscal discipline for the fifth consecutive year, and did so without (much) apology.

Fiscal Follies

Fiscal stimulus is turning into fiscal austerity and a drag on growth.

What is needed, though, is a collective agreement on fiscal discipline, and a revival of the Stability and Growth Pact, which was unwisely abandoned ironically when the French and Germans found its rules too constraining.

Europe s Fiscal Wormhole

America s Fiscal Isolationism

Fiscal Closing Time?

Fiscal Child Abuse

Germany s Fiscal Follies

India s Fiscal Follies