policy instruments or the appropriateness of fiscal institutions or both. Specifically, among the
group of disenchanted reformers, a relatively large number of economists believe that fiscal
discipline should be the main aim of the SGP and they clearly share this view with the
economists in the second group, the defenders of fiscal discipline. However, there are distinct
differences concerning the way the agreed goal can or should be implemented. Some think
that - within an appropriate institutional design - fiscal policy-making would be conducive to
fiscal discipline, while others are more sceptical about the possibility of effectively pursuing
fiscal discipline because, depending on the state of the economy, it should be traded off with
other goals.
A further element of dissent for a given goal is the time frame. A large number of proposals,
especially those put forward by the defenders of fiscal discipline, argue that fiscal discipline
should be enforced on a yearly basis. Conversely, there are many economists among both the
disillusioned reformers and the supporters of long-term sustainability maintaining that fiscal
discipline must be assessed over a longer period within the framework of the intertemporal
budget constraint.
In many cases, when there is disagreement about goals, the proposals still stand on the
common ground that some improvements or changes in existing fiscal institutions would be
instrumental in improving fiscal performance, and in any case better than going for a pure
'market solution'. However, in this context, the dissent often refers to the question of whether
policy-makers should be given more or less discretion in implementing the rules. Some
proposals suggest reliance on more independent fiscal authorities (many are to be found
among the defenders of fiscal discipline and some among the supporters of long-term
sustainability), possibly run by experts rather than by politicians, while others call for more
flexibility and leeway for national policy-makers, not least with a view to increasing
ownership of the fiscal rules.
The existence of these two fundamentally different views, the traditional view assuming
welfare-maximizing policy-makers and the political economy view, is evident in very many
proposals. These two approaches give radically different policy recommendations. The
traditionalists tend to support a loosening of the Pact, giving more discretionary power to
policy-makers. Economists in the political economy camp tend to suggest stronger constraints
on policy-makers. The debate is basically about constraining or liberating the fiscal policy-
-27-
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