Abstract:

One of the criteria for assessing the strength of fiscal rules is the occurrence of escape clauses, which allow to provide fiscal rules with resilience to shocks and give those rules flexibility. The meaning of this criteria is demonstrated by the experience related with the sharp downturn of sustainability in public finances in the face of the COVID-19 pandemic. The following paper indicates that despite the still insufficient commonness of escape clauses in fiscal rules, their presence is a factor affecting the strength of fiscal rules. The studies conducted have confirmed that the real effect of including the escape clause in the fiscal rule on the Fiscal Rule Strength Index is admittedly not decisive, but noticeable enough that it allows to demonstrate statistically significant differences in the strength of fiscal rules in relation to the criteria of occurrence of escape clauses. It was pointed out, in addition, that a challenge for the fiscal stability of EU Member States will be determining the moment of return to the use of rules in relation to which the escape clauses have been applied in response to the crisis caused by the COVID-19 pandemic.