Volker Wieland's picture
Affiliation: 
Goethe University Frankfurt and IMFS
Credentials: 
Professor of Monetary Economics
Member of German Council of Economic Experts
Managing Director, Institute for Monetary and Financial Stability

Voting history

Fiscal Rules in the European Monetary Union

Question 2: Which of the following is the one reform you would choose to improve fiscal rules?

Answer:
No change, stricter rules, or better enforcement
Confidence level:
Confident
Comment:
It would be sensible to put the focus on an expenditure-based rule in order to obtain a more transparent and enforcible handling of the rules. This can be achieved without a treaty change. The existing rules have been implemented in a very flexible manner. So lack of flexibility is not the problem.

Proposition 1: The existing fiscal rules for European Monetary Union members require revision.

Answer:
Agree
Confidence level:
Confident
Comment:
The existing rules are workable but need to be strengthened to achieve their goal "consolidation of finances in good times to create fiscal room for maneuver in bad times". Most importantly, they need to be followed. Too often they have been disregarded. Of course, the corona exception is the correct decision. However we need to get back to a stability-oriented and sustainable fiscal policy when the economy is back above the pre-crisis level. There are sensible proposals to switch to emphasize an expenditure-based rule without having to change the Maastricht treaty.

The ECB’s Green Agenda

Question 2: Would you support changing the ECB’s mandate to incorporate the EU’s target of carbon neutrality by 2050, if such a change is deemed legally necessary to adopt your preferred approach?

Answer:
No
Confidence level:
Extremely confident
Comment:
Achieving carbon neutrality of the EU economy by 2050 and achieving price stability in the euro area in the medium are two completely different objectives that require deploying different policy tools and can be achieved independently of each other.

 Question 1: Which of the following actions is the most advisable approach for European Central Bank to address the environmental impact of its bond-purchasing policies?

Answer:
No change in policy
Confidence level:
Very confident
Comment:
The size of the ECB balance sheet and its bond holdings should be governed by its effects on the primary objective laid down in the treaty, which is price stability. For example, if there is a sustained increase in inflation beyond its aim, it should be respond by reducing the balance sheet, including bond holdings, and eventually raising policy rates. So bond holdings are not available as a permanent tool to use to achieve climate objectives. The ECB can and should take into account negative side effects of its policies. This is implied by the the secondary objective laid down in treaty, which is to support Union policies in other areas. In some of these areas it may contribute positively and significantly, for example, counteracting short-run fluctuations of economic activity and employment or financial stability. That's why it defined its pursuit of price stability to occur over the medium term. Side effects of its monetary policy on long-term climate change are insignificant. Governments have other tools to effectively combat climate change, such as a price for CO2 emissions and, if needed, subsidies or tax incentives for particular CO2 emission reducing investments. Monetary policy can not play an important role, but can risk failing on its primary objective and in other areas, if it is side-tracked by fine-tuning its balance sheet to achieve certain climate effects.

The Eurozone COVID-19 Crisis: EU Policy Options

Question 2: What is the best mechanism to pay for economic support provided by and to EU member states to combat the COVID-19 crisis?

Answer:
Other or no opinion
Confidence level:
Confident
Comment:
I chose "other" because I would favor the combination of national fiscal effort together with an ESM credit line or additional ESM facility if needed. This would involve a minimal degree of conditionality. It is most likely to be necessary for member states that entered this crisis already with high debt levels and low growth. ECB purchases under an OMT like program conditional on the ESM credit line or other facility can help prevent an up-surge in risk premia. EU and EIB can help with funding for targeted projects, especially in the health sector and those sectors needed to perform well to achieve an effective public health strategy. Close collaboration and some direct transfers to struggling member states are likely to be needed in this context. All member states are searching for a way to get out of the lockdowns that allows containing the pandemic in the absence of a vaccine while "re-starting" or accelerating economic activity. There is tremendous need for data and analysis, keeping an open mind and learning from each others strategies. Joint bond issuance under joint and several liability of member states while keeping full control over expenditure, tax and debt policies on the respective member state level is not a good idea. It would be likely to induce conflicts and politically de-stabilizing dynamics in the EU down the road. It would make more sense in a situation where a substantial degree of sovereignty is transfered to an EU federal government. But that's not on the table.

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