This presentation was made by José Luis Escriva, Spain, at the 9th Annual Meeting of the OECD network of Parliamentary Budget Officials and Independent Fiscal Institutions held in Edinburgh, Scotland, on 6-7 April 2017.

1. Fiscal council session:
The Fiscal Compact, EU IFIs and the new EFB
José Luis Escrivá
Chair of AIReF and Network of EU Independent Fiscal Institutions
9th Annual Meeting of the OECD Network PBOs & IFIs
Edinburgh,April 6-7, 2017

2. 2
Post-crisis reforms opened a promising avenue
to strengthen fiscal discipline
Post-crisis reforms
(6 pack, FC, 2 pack)
1. Centralized approach
maintained: SGP
strengthened (rules and
enforcement)
2. Novelty by fostering
decentralized elements:
national ownership of fiscal
discipline
 More rules
 Stricter
 Council discretion reduced
 National IFIs
 Domestic fiscal rules
 Medium term budgetary frameworks
 Transparency
 Coordination mechanisms across administrations
o Expenditure benchmark & debt rule
o “MTO” more demanding (-0.5% of GDP)
o Council: greater automatism (RQM)
o Commission: wider autonomy
 EFB set up

3. But is the decentralized approach progressing?
Are national budgetary frameworks becoming stronger?
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 Heterogeneous progress across countries and issues
 The creation and consolidation of IFIs: a bumpy path along the road
Practice still far from the principles that should guide IFIs design and activity.
Gap between theory or legislation and practice
Areas of slower progress
 Medium Term budgetary
frameworks:“2-pack” solution
unsatisfactory”
 Transparency: too much to do
on fiscal benefits and contingent
liabilities
More positive outcomes on
 Budgetary data
 Macro forecasts

4. What are the main challenges for national IFIs
to perform their functions? (1)
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 Several surveys (self- assessment by IFIs of OECD principles, EUNIFI surveys) and
indexes of “potential effectiveness” built on these surveys and other databases (IMF
fiscal council dataset)
 Functional autonomy:
 disparities in financial and human resources not matched by differences in mandates
(Hovarth (2017). CBR, Discussion paper no 1/2017)
 some IFIs still claim inadequate resources (EUNIFI Survey, Network surveys)
 somewhat limited capacity to manage financial and staff resources (EUNIFI Survey,
Network surveys)
 “Comply or explain” (Network questionnaire)
 in most cases, no operative
 recommendations: ignored or insufficiently explained
 clear need for reinforcing its implementation (lack of culture of transparency and
accountability)

5. 5
 Access to information still problematic: many cases where info is considered
poor (just public info or less degree of info than MPs)………
 At EU level:
o Info about EU fiscal rules and procedures (letters of national authorities about
the FC transposition unknown)
o Info on fiscal surveillance techniques by the EU or national institutions.
 At national level
o Info on budgetary procedures at the non-central government level (Social
Security, Sub-Nationals, State-Owned Enterprises, etc.)
o Methodological information about how the government costs its measures.
……………...and inefficiently provided to IFIs (no direct requests)
What are the main challenges for national IFIs
to perform their functions? (2)

6. 6
What are the main challenges for national IFIs
to perform their functions? (3)
 Preliminary evidence points IFIs still face weaknesses
 Only 45% out of the 20 IFIs covered exhibit scores above 0.5
 Lack of resources and problems with information access main reasons
behind low scores
Source: Horvath M. (2017), “European Fiscal Compact in Action: can independent fiscal institutions deliver effective
oversight?. CBR, Discussion paper no 1/2017.
0
5
10
15
20
25
30
35
0.0-0.1 0.1-0.2 0.2-0.3 0.3-0.4 0.4-0.5 0.5-0.6 0.6-0.7 0.7-0.8 0.8-0.9
Frequency
index score
Aggregate index of potential effective oversight

7. 7
 It has made a difference to the governance model for fiscal policy. But can EU IFIs
provide effective oversight over national budgetary policies?
 Several studies/reports are already addressing this issue. Most of them adopt a
too formal or legal approach or remain in a too theoretical dimension. But evidence
(Beestma and Debrun (2016), Horvath (2017)) shows some features (mainly related with
their functional autonomy) need to be strengthened to become effective
 IFIs are still very much on a learning curve, actively engaged in solving practical
problems in order to become truly effective institutions
 Two recommendations:
 The Commission should conduct an assessment beyond legal aspects
o Do IFIs have the capacity to produce regular and comprehensive evaluations of public
finances over different time horizons?
o Do the governments/legislatures respond to the IFIs recommendations?
 Member States should facilitate their smooth functioning
Conclusions: (1) the Fiscal Compact has been a positive step

8. 8
 Practical monitoring of fiscal rules is still a challenging task
 Despite simplification efforts, rules continue to be based on complex analytical
tools, procedures and interpretation agreements
 IFIs well-placed to monitor and are contributing to making them more accessible
 But both the ownership and the effectiveness of the EU fiscal framework would
benefit from further simplification
 The Network welcomes that one of the tasks included in the remit of EFB is
for it to carry out an evaluation and make suggestions on the functioning of the
EU fiscal framework. We stand ready and willing to make our contribution as well as
in other EFB tasks
Conclusions: (2) but its basics continue to be overly complicated

9. Thank you for your attention
For further details on Network activities visit
www.euifis.eu
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