Question A:
The fiscal rules of the European Union should give more flexibility to member countries.
Responses
Responses weighted by each expert's confidence
Question B:
The Italian budget for 2019 that the European Commission rejected in October would have increased Italy’s risk of fiscal insolvency substantially.
Responses
Responses weighted by each expert's confidence
Question C:
If France runs a 2019 budget deficit of around 3.4% of GDP, as announced by President Macron’s government, France’s risk of fiscal insolvency will increase substantially.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 Franklin Allen |
Imperial College London | Bio/Vote History | ||
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There are arguments both ways. Not fully persuaded either way.
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 Pol Antras |
Harvard | Bio/Vote History | ||
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 Timothy J. Besley |
LSE | Did Not Answer | Bio/Vote History | |
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 Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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the rules are rigid, but are broken with great regularity. There must be a better way.
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 Nicholas Bloom |
Stanford | Bio/Vote History | ||
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 Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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 Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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More flexibility in the sense of more leeway for counter-cyclical policies; not in the sense of an ever rising debt nor even more complexity
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 Elena Carletti |
Bocconi | Bio/Vote History | ||
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It depends on what flexibility could be used for.
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 Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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 Paul De Grauwe |
LSE | Did Not Answer | Bio/Vote History | |
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 Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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 Ernst Fehr |
Universität Zurich | Did Not Answer | Bio/Vote History | |
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 Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
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 Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
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 Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Given the limited synchronisation, and the single monetary policy, it is desirable to have a strong stabilizing tool at the country level.
-see background information here |
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 Luis Garicano |
LSE | Did Not Answer | Bio/Vote History | |
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 Francesco Giavazzi |
Bocconi | Bio/Vote History | ||
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provided more flexibility at the country kevel is accompanied by more “market discipline”
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 Rachel Griffith |
University of Manchester | Did Not Answer | Bio/Vote History | |
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 Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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 Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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the common currency requires some fiscal discipline at the national level
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 Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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 Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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 Henrik Kleven |
Princeton | Did Not Answer | Bio/Vote History | |
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 Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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The rule itself should be rock-solid, the user should herself select the buffers required to achieve the desired degree of flexibility.
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 Per Krusell |
Stockholm University | Bio/Vote History | ||
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 Botond Kőszegi |
Central European University | Bio/Vote History | ||
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 Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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 Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Flex good to avoid pro-cyclical tightening but issue is time inconsistency&incentives. Adopt bounds for deficits that depend on cycle in EU?
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 Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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 Costas Meghir |
Yale | Bio/Vote History | ||
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 Peter Neary |
Oxford | Bio/Vote History | ||
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Maastricht rules are very restrictive. Some kind of closer fiscal union needed to control moral hazard, but stabilisation more important
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 Kevin O'Rourke |
Oxford | Bio/Vote History | ||
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 Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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 Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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Yes but only after reforms making sovereign default possible (e.g., break the doom loop). Cannot use monetary policy => need fiscal policy.
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 Torsten Persson |
Stockholm University | Bio/Vote History | ||
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 Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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Member countries are still exposed to different shocks and fiscal policy should partly respond to idiosyncratic requirements
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 Richard Portes |
London Business School | Bio/Vote History | ||
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 Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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 Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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 Rafael Repullo |
CEMFI | Bio/Vote History | ||
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 Hélène Rey |
London Business School | Bio/Vote History | ||
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more flexibility over the cycle, more ownership. See Franco german proposals below.
-see background information here |
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 Antoinette Schoar |
MIT | Did Not Answer | Bio/Vote History | |
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 Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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 John Van Reenen |
LSE | Bio/Vote History | ||
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Eurocrisis period showed that Commission had too much of a pro-austerity bias
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 John Vickers |
Oxford | Bio/Vote History | ||
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 Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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 Beatrice Weder di Mauro |
The Graduate Institute, Geneva | Bio/Vote History | ||
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Mostly it is about making the rules less pro-cyclical and less policially divisive (see CEPR Policy Insight 91)
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 Karl Whelan |
University College Dublin | Bio/Vote History | ||
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The rules should focus on maintaining overall debt sustainability and not on randomly chosen figures (such as deficit limits of 3 percent).
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 Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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My long-held view is that fiscal discipline is a national prerogative, which is why the pact always fails when needed.
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 Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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Italy has significant fiscal problems. They need to get their debt under control.
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Pol Antras |
Harvard | Bio/Vote History | ||
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Timothy J. Besley |
LSE | Did Not Answer | Bio/Vote History | |
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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bad, but not the end of sustainability. https://piie.com/publications/policy-briefs/impact-italys-draft-budget-growth-and-fiscal-solvency
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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The problem is not the deficit of 2019 but its use and the lack of commitment for the future.
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Elena Carletti |
Bocconi | Bio/Vote History | ||
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the main problem is what the deficit was supposed to be used for, not necessarily the size of the deficit.
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Needs to distinguish between a one-shot deviation from set deficit limit and a significant weakening of commitment to decrease debt to GDP
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Paul De Grauwe |
LSE | Did Not Answer | Bio/Vote History | |
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Did Not Answer | Bio/Vote History | |
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Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Luis Garicano |
LSE | Did Not Answer | Bio/Vote History | |
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Francesco Giavazzi |
Bocconi | Bio/Vote History | ||
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Rachel Griffith |
University of Manchester | Did Not Answer | Bio/Vote History | |
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Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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the issue is not the size of budget per se but that it introduces a number of permanent commitments on government expenses
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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But further deterioration in deficit could quickly bring trouble.
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Henrik Kleven |
Princeton | Did Not Answer | Bio/Vote History | |
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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It increasese default probability through its indirect effect on future debt incentives; while the direct effect may be negligible.
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Per Krusell |
Stockholm University | Bio/Vote History | ||
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Botond Kőszegi |
Central European University | Bio/Vote History | ||
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Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Deficit was not much above rules, but debt is high & spreads reacted accordingly. Bigger issue may have been budget broke earlier promises.
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Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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Costas Meghir |
Yale | Bio/Vote History | ||
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Peter Neary |
Oxford | Bio/Vote History | ||
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The right decision given current rules - which should be changed.
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Kevin O'Rourke |
Oxford | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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Italy's public debt is uncomfortably large, growth rate uncomfortably low, and monetary policy is in the hands of the ECB.
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Torsten Persson |
Stockholm University | Bio/Vote History | ||
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Main risk may not be the direct fiscal effects, but the indirect effetcs via a higher interest spreads and defaulting banks.
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Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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Depends on the commentary from the European Commission and on the fiscal policies agreed at central policy level
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Richard Portes |
London Business School | Bio/Vote History | ||
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Hélène Rey |
London Business School | Bio/Vote History | ||
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High level of debt. Market dynamics unstable on Italian debt.
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Antoinette Schoar |
MIT | Did Not Answer | Bio/Vote History | |
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Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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John Van Reenen |
LSE | Bio/Vote History | ||
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John Vickers |
Oxford | Bio/Vote History | ||
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See bond yields
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Beatrice Weder di Mauro |
The Graduate Institute, Geneva | Bio/Vote History | ||
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It’s not mainly about debt sustainably but about the risk of a run on the debt.
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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Insolvency risk is driven by loss of market confidence and failure to roll over existing debt. This government is close to provoking this.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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A few basis points don't matter for a debt that stands at 130% of GDP. The problem is about unfunded liabilities.
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Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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France's fiscal situation is still under control. The problem is the effect on the Commission's interaction with Italy.
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Pol Antras |
Harvard | Bio/Vote History | ||
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Timothy J. Besley |
LSE | Did Not Answer | Bio/Vote History | |
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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with r less than g, debt dynamics are more favorable than they used to be. Some deficits, when needed, are ok.
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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Agnès Bénassy-Quéré |
Paris School of Economics | Bio/Vote History | ||
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Due to double counting the deficit is inflated by 0.9pp and France has no problem of market access. But commitment to adjust necessary.
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Elena Carletti |
Bocconi | Bio/Vote History | ||
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Paul De Grauwe |
LSE | Did Not Answer | Bio/Vote History | |
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Did Not Answer | Bio/Vote History | |
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Xavier Freixas |
Barcelona GSE | Did Not Answer | Bio/Vote History | |
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Did Not Answer | Bio/Vote History | |
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Not if the increase is transitory. Developments in r, g and pi may dominate the impact of a small increase in the structural deficit
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Luis Garicano |
LSE | Did Not Answer | Bio/Vote History | |
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Francesco Giavazzi |
Bocconi | Bio/Vote History | ||
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Rachel Griffith |
University of Manchester | Did Not Answer | Bio/Vote History | |
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Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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France has still fiscal room, measures are transitory
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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But has substantial consequences for future ability of Macron administration to achieve domestic and European reforms...
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Henrik Kleven |
Princeton | Did Not Answer | Bio/Vote History | |
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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As in the case of Italy, rule-breaking carries the risk of repetition, although to a lessor extent for France.
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Per Krusell |
Stockholm University | Bio/Vote History | ||
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Botond Kőszegi |
Central European University | Bio/Vote History | ||
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Eliana La Ferrara |
Harvard Kennedy | Bio/Vote History | ||
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Absolute level still low, but rel. increase in spreads is substantial. Main concern is that reason for larger deficit is inability to reform
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Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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Costas Meghir |
Yale | Bio/Vote History | ||
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Peter Neary |
Oxford | Bio/Vote History | ||
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What’s good for Italy ...
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Kevin O'Rourke |
Oxford | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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increase, yes, but substantially, no.
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Torsten Persson |
Stockholm University | Bio/Vote History | ||
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Christopher Pissarides |
London School of Economics and Political Science | Bio/Vote History | ||
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France is less at risk than Italy (better finances and debt) and Macron's policies should bring more growth in the medium term
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Richard Portes |
London Business School | Bio/Vote History | ||
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Hélène Rey |
London Business School | Bio/Vote History | ||
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Structural reforms are done/ being done in France. Level of debt manageable.
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Antoinette Schoar |
MIT | Did Not Answer | Bio/Vote History | |
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Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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John Van Reenen |
LSE | Bio/Vote History | ||
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John Vickers |
Oxford | Bio/Vote History | ||
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Beatrice Weder di Mauro |
The Graduate Institute, Geneva | Bio/Vote History | ||
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Not solvency but the ability of the French government to push reform of the Euro area is immediately at risk.
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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France has lower debt\GDP and there is far less likelihood of a bond market "strike" on buying French debt. 3 percent is an arbitrary limit.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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Same observation as for Italy.
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Fabrizio Zilibotti |
Yale University | Bio/Vote History | ||
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