ifo Annual Meeting 2022

Monetary and Fiscal Policy in the EU under Changing Geopolitical Conditions

During the financial crisis and the coronavirus crisis, the European Union’s member states accumulated large debts. And the next shock has already hit the community: the war in Ukraine is weakening economic development and requires new arms spending, aid for refugees, and heavy investment in new energy supply infrastructure. Even in less turbulent times, many EU countries had broken the rules of the Stability Pact (including Germany), without significant consequences. A return to the debt ceiling of 60 percent of economic output seems illusory, especially for highly indebted member states. What does this mean for the economic development of the EU? What is the future of the eurozone? How might it be reformed? What to make of calls to create new joint debts at the European level to absorb the consequences of the Ukraine war? What role does the ECB play?