Fiscal policy of the EU: Implications for Romania

Abstract

The economic and fiscal crisis which started in 2007–2008 triggered a significant change in the economic governance at the European Union level, particularly at the fiscal policy level. The paper analyses the evolution of the EU economic governance regulation, starting with the Maastricht Treaty from 1992, focusing on the more recent regulations outlined in the Treaty on Stability, Coordination and Governance (TSCG), particularly on the Fiscal Compact. The paper assesses the impact of the Fiscal Compact in Romania, pointing out the major consequences it has on the conduct of the fiscal policy and on the capacity to stabilize the business cycle. The study concludes that the space for maneuver of the fiscal policy in Romania will be much lower than in the past. Possible solutions to this constraint include the acceleration of the absorption of EU funds and the increase in public spending efficiency.