The sustainability of public debt is interpreted as the result of the interaction of fiscal policy with the economic environment, and not as a statistical concept as in most of the recent literature. If debt is not to explode over time, policymakers have to respond to the changing conditions in the macroeconomic environment. This article defines the conditions that will ensure compliance of fiscal policy with the intertemporal budget constraint in the context of Europe's fiscal policy rules. The empirical part of the article reveals that European public debt is sustainable in this respect, but questions regarding long‐run liquidity requirements remain unresolved.
The monetary dialogue between the European Parliament and the European Central Bank (ECB) is a key component for the democratic accountability of the independent central bank. We provide new evidence for the efficiency of the dialogue and present the results of a survey conducted amongst the members of the parliament's ECON (economic and monetary affairs) committee. We find that while the monetary dialogue may have had little or even a negative impact on financial markets, it plays a significant role in informing and involving members of parliament and their constituencies. Amidst an intensifying debate about the communication and transparency of the ECB, these findings shed new light on the current state of affairs of ECB accountability and its alleged need for enhancement.
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