fiscal responsibility laws

[Napodano]

There is a lot of talking and some action in the EU to have EU member States to introduce fiscal responsibility laws and include a reference in their Constitutions.

Here what the IMF blog have to say
http://blog-pfm.imf.org/pfmblog/2010/11/should-advanced-countries-adopt-a-fiscal-responsibility-law.html

Searching in the same blog for 'fiscal responsibility' gives the following entries:
http://blog-pfm.imf.org/pfmblog/searchresults.html?cx=000427552678830834717%3Aemomtfmxrns&cof=FORID%3A11&q=fiscal+responsbility+law#1055

Any additional link and document you will suggest, PFMBoarders?

[STONE]

Fiscal Responsibility Laws - well it would be silly to have a fiscal irresponsibility law wouldn't it?

Leinert's piece is interesting especially as it talks about New Zealand and how the FRL was introduced to deal with a debt problem!
It would be interesting to see where FRL provisions have been breached and what reference is made to them in the budget debates following a lapse into irresponsibility.  He refers to the old fashioned British way of budgeting - take it or leave it.  But leaving it meant a vote of no-confidence in the Government.  If a Government has a firm majority and strong party discipline it will get a budget through, fiscally responsible or not.  Of course, a Government can be brought down for not being sufficiently irresponsible.

Government's break laws all the time and can be challenged in the courts (in some "advanced' countries at least).  I find it hard to imagine how Jospehina Citizen could make an application to a High Court to get the Government to correct an irresponsible budget - although it does seem that an attempt of this sort has been made recently in Germany.

Parliaments (and so Governments with solid majorities) are sovereign  that means they can ignore or change laws as they wish.  All the courts (at whatever level) can do is remind Governments when they pass contradictory or un-constitutuonal legislative measures.

[petagny]

I think one has to be a little careful not to project the UK's constitutional settlement onto the rest of the world. I quote from Tom Bingham's book, 'The Rule of Law':

'Our acceptance of parliamentary sovereignty, by contrast, distinguishes us from all other members of the European Union, the United States, almost all the former Dominions and those former colonies to which this country granted independent constitutions. In all these countries the constitution, interpreted by the courts, has been the supreme law of the land, with the result that legislation inconsistent with the constitution, even if duly enacted, may be held to be unconstitutional and so invalid.'

Hence the recent referral of German support to the euro-zone bailouts to their constitutional court.

[petagny]

I asked for guidance from someone who has been specialising in drafting fiscal responsibility laws and she pointed me to the IMF site. So it looks like Napodano has hit the right source!

This paper on the effectiveness of FRLs in Latin America is also available:

http://www.imf.org/external/pubs/ft/wp/2010/wp10248.pdf

The conclusion is:

'Overall, we find limited empirical evidence in support of the view that Fiscal Responsibility Laws have had a distinguishable effect on fiscal performance. However, Fiscal Responsibility Laws could still have other positive effects on the conduct of fiscal policy not analyzed here, for instance, through enhanced transparency and guidance in the budget process and lower risk premia.'