Opinion & Analysis

France and Italy: The ABCs of the European fiscal framework by Alvaro Leandro

The EU’s fiscal framework, the Stability and Growth Pact (SGP), is a complicated system of fiscal rules. Rather than trying to assess the virtues and failures of the SGP, this blogpost aims at understanding its complex rules through the lens of the draft budget plans of France and Italy. France is in the corrective arm of the SGP, while Italy is now in the preventive arm, which allows the examination of various SGP requirements such as the structural balance pillar, the expenditure balance pillar, and the debt criterion which apply to countries in the preventive arm (like Italy), and the headline budget deficit criterion, the structural balance criterion, and the cumulative structural balance criterion which apply to countries in the corrective arm (like France). We also discuss the rules regarding financial sanctions.