Against the background of the European Commission’s reform plans of the Stability and Growth Pact, this paper uses NiGEM to simulate the macroeconomic implications of re-applying the fiscal rules in 2024. Next to returning to the unreformed rules, the most prominent options include an expenditure rule. Our results indicate that re-applying the unreformed rules leads to severe cuts in public spending. An expenditure rule would, however, not necessarily alleviate the fiscal adjustment burden. Instead, our simulations show that great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way.

This article proposes the “muting” of the SGP, the framework of rules that the EU has implemented since the coming into being of the European Monetary Union in the fiscal domain. It is argued herein that the system is far from being credible, from the perspective of the law-as-credibility paradigm. Therefore, the legal condition of the SGP should be “muted”. Three proposals to legally mute the SGP are examined in this article. The Open Method of Coordination is used as a useful model that could be followed from now on in the EU fiscal field. The gains in terms of legal credibility would argue in favour of the muting of the SGP and its correlative conversion into an OMC-like system.