The New EU Fiscal Rules – Application to Historical Data

This bachelor’s thesis analyses the application of the European Union’s new fiscal rules using historical data from four selected countries, namely Germany, Austria, Belgium and Italy, over the time period 2013-2019. Based on the European Commission’s proposal from 2023, expenditure trajectories are constructed to reflect the requirement of reducing the debt-to-GDP ratio by 0,5 % or 1 % annually. These trajectories are then compared with limits derived from the former fiscal rules as well as with the actual development of public expenditures. For the calculations, an adjusted debt dynamics equation is being used, linking debt, interest rate, economic growth and primary balance. The results indicate that the favourability of the new rules depends on each country’s macroeconomic conditions and the efficiency of debt ratio reduction. The findings emphasize the importance of well-designed expenditure paths and the European Commission’s role in their approval and oversight. The thesis contributes to a better understanding of the practical implications of the reformed rules and highlights both their greater flexibility and potential risks.