Designing conditionality in the supply of European public goods

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Designing conditionality in the supply of European public goods

This paper studies the consequences of placing conditions on access to sources of central financing

Publishing date: 03 December 2024
Authors: Roel Beetsma Marco Buti

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The European Union will need in the coming years to invest a substantial amount of resources in European public goods (EPGs), including for the digital and climate transitions, and for defence and security. Funding for this could be provided in a centralised way at EU level, via either a fund or from the EU budget, but for this to be politically viable, and to create the necessary trust, national budgetary policies need to comply with the common EU fiscal rules. Setting adequate conditions for access to central financing is, however, not straightforward. The tightness of the conditionality needs to balance the desirability of a country pursuing sound fiscal policies with the need to deliver on the provision of EPGs that benefit several or all EU countries. The optimal tightness should reassure fiscally-conservative countries that EU money would not result in opportunistic behaviour that results in less discipline at national level. More fiscally fragile countries should be reassured that their fiscal retrenchment efforts will be duly rewarded.

About the authors

Roel Beetsma

Roel Beetsma is Dean of the Faculty of Economics and Business of the University of Amsterdam and Professor of Macroeconomics. He is also Visiting Professor at Copenhagen Business School and Research Fellow of the CEPR and CESifo. He was a Member of the European Fiscal Board, the Supervisory Board of ASR Vermogensbeheer and the Supervisory Board of the pension fund for the Dutch retail sector. He has held visiting positions at DELTA (Paris), the University of British Columbia (Vancouver), the University of California in Berkeley and the EUI Florence. He has been a consultant for the ECB, the European Commission and the IMF. He was the Chair of a Dutch government commission on the European economy and Member of a Dutch government commission on second-pillar pensions. His research has been widely published in such journals as the American Economic Review, the Journal of Economic Literature and the Economic Journal.
Marco Buti

Marco Buti, holds the Tommaso Padoa-Schioppa Chair in economic and monetary integration at the European University Institute. Former Chief of Staff of the Commissioner for the economy, Paolo Gentiloni, and until 2019, Director-General for Economic and Financial Affairs at the European Commission (DG ECFIN).