What drives national implementation of EU policy recommendations?

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What drives national implementation of EU policy recommendations?

The authors use a newly-compiled dataset to investigate whether and why European Union countries implement the economic policy recommendations they re

Publishing date: 25 April 2019
Authors: Guntram B. Wolff Konstantinos Efstathiou

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We use a newly-compiled dataset to investigate whether and why European Union countries implement the economic policy recommendations they receive from the EU. We find that implementation rates are modest and have worsened at a time when the economic environment has improved and market pressure on sovereigns has subsided. Implementation has deteriorated in particular among countries designated as having ‘excessive’ macroeconomic imbalances. We then empirically test three factors that could influence implementation rates: (i) the macroeconomic environment; (ii) pressure from financial markets; and (iii) the strength of EU-level macroeconomic surveillance.

The econometric estimates indicate that larger fiscal and current account deficits and a higher probability of sovereign default increase the likelihood of implementation. However, stronger surveillance under the Macroeconomic Imbalances Procedure (MIP) does not seem to drive implementation rates. The quality of governance, the fragmentation of government coalitions and fewer recommendations received are connected to increased implementation, whereas for countries under the MIP, implementation slowed during election years. Finally, recommendations on financial services have a much greater chance of being implemented, whereas those on broadening the tax base, the long-term sustainability of public finance and pension systems, and competition in services are much less likely to be implemented. Overall, economic fundamentals and political economy factors provide only a small part of the answer to the question of why countries reform: ultimately, reform decisions are down to factors outside of the models.

About the authors

Guntram B. Wolff

Guntram Wolff is a Senior fellow at Bruegel. He is also a Professor of Economics at the Université libre de Bruxelles (ULB).

From 2022-2024, he was the Director and CEO of the German Council on Foreign Relations (DGAP) and from 2013-22 the director of Bruegel. Over his career, he has contributed to research on European political economy, climate policy, geoeconomics, macroeconomics and foreign affairs. His work was published in academic journals such as Nature, Science, Research Policy, Energy Policy, Climate Policy, Journal of European Public Policy, Journal of Banking and Finance. His co-authored book “The macroeconomics of decarbonization” is published in Cambridge University Press.

An experienced public adviser, he has been testifying twice a year since 2013 to the informal European finance ministers’ and central bank governors’ ECOFIN Council meeting on a large variety of topics. He also regularly testifies to the European Parliament, the Bundestag and speaks to corporate boards. In 2020, ranked him one of the 28 most influential “power players” in Europe. From 2012-16, he was a member of the French prime minister’s Conseil d’Analyse Economique. In 2018, then IMF managing director Christine Lagarde appointed him to the external advisory group on surveillance to review the Fund’s priorities. In 2021, he was appointed member and co-director to the G20 High level independent panel on pandemic prevention, preparedness and response under the co-chairs Tharman Shanmugaratnam, Lawrence H. Summers and Ngozi Okonjo-Iweala. From 2013-22, he was an advisor to the Mastercard Centre for Inclusive Growth. He is a member of the Bulgarian Council of Economic Analysis, the European Council on Foreign Affairs and advisory board of Elcano. He is also a fellow at the Kiel Institute for the World Economy.

Guntram joined Bruegel from the European Commission, where he worked on the macroeconomics of the euro area and the reform of euro area governance. Prior to joining the Commission, he worked in the research department at the Bundesbank, which he joined after completing his PhD in economics at the University of Bonn. He also worked as an external adviser to the International Monetary Fund. He is fluent in German, English, and French. His work is regularly published and cited in leading media.
Konstantinos Efstathiou

Konstantinos, a Greek citizen, works in Bruegel as an Affiliate Fellow in the Macroeconomics and Governance area. Before joining Bruegel, Konstantinos was at the European Commission, as a Blue Book Trainee in the Cabinet of President Juncker. He also interned at the Central Bank of Luxembourg (BCL) as a research assistant, involved in projects related to the Wage Dynamics Network (WDN) research group.

He holds a Master in International Economics and International Relations from the Johns Hopkins University School of Advanced International Studies (SAIS), where he specialized in Quantitative Methods and European Studies.

Konstantinos’ research interests include macroeconomics, European economic governance and international economics.

Konstantinos is a native speaker of Greek, speaks fluent English and has good knowledge of French.