The (potential) contribution of the European Union’s fiscal architecture to financial stability

Abstract

Based on a discussion of main channels through which fiscal stability can contribute to financial stability, the current legal governance framework of the euro area and the experience gained in its application are assessed with the aim to offer an answer to the question alluded to in the title, namely whether the EU’s fiscal architecture, namely the current EMU legal framework on economic policy coordination, provides a meaningful contribution to financial stability. Moreover, the potential of this framework to accommodate future measures to enhance fiscal stability is briefly assessed.