Fiscal policy in EMU Prepared by/ Mohamed Sayed Abunar Asaad Tolba Abdel-Halim Supervised with/ Prof Dr. Nagwa Sama k

We will discuss the issue of fiscal policy in EMU through the following points:- - introduction. - the presentation objectives. - the Economic rationale for fiscal coordination in the Euro-Zone. - coordination by rules and other institutional arrangements:- constraints and incentives on national governments choices. - the case of supra-national fiscal rules in a monetary union. - proposals to improve the pact.

-Introduction: 1) the establishment of EMU and fiscal monitoring. 2) the stability programme. 3) the budgetary positions. The presentation objectives:- The integration of national fiscal policies into a coherent European stance is the main problem, as the difficulties of implementing the Stability and Growth Pact reveal, then This presentation argues the following:- An optimal policy mix in Euro-land requires an integrated fiscal policy framework that also takes into account the budget of the EU. The aggregate fiscal policy stance in Euro-land, which matters for monetary policy, is then the book-keeping result of adding up the different national budget positions. The necessity for fiscal co-ordination to prevent individual member states from abusing on intertemporal transfers, at the expense of the others.

The Economic Rationale for Fiscal Coordination in the Euro- Zone:- 1:- Fiscal Policy in a Monetary Union - policy outcomes in Europe * Policy objectives * policy instruments * policy targets. - the need for policy coordination (externalities:- the rationale for policy coordination) - objections for coordination 2:- The Nature of Macroeconomic Spillovers from Fiscal Policies 3:- Tax Competition 4:- external Effects from Domestic Public Spending 5:- structural reforms and others sources of spillovers - cohesion - enlargement 6:- Rules vs. Discretion: The Distrust of Democratically Elected Governments

-Coordination by Rules and other Institutional Arrangements: Constraints and Incentives on National Governments Choices 1- Negative Coordination by Rules: Outlawing Dangerous or Harmful Strategies 2- The Aggregate Policy Mix -The case for supra-national fiscal rule in a monetary union. 1- externalities arising from unsustainable public debt. 2- externalities from excessive deficits when sustainability is assured.

Some proposals to improve the pact 1- expenditure rule. 2- allocating of deficit rights 3- an independent fiscal authority. 4- making debt sustainability central to the SGP.

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