Do EU fiscal rules support or hinder counter-cyclical fiscal policy?

Rather than stabilising aggregate demand, discretionary fiscal policy tends to amplify cyclical fluctuations of output. The commonly accepted reasons are political economy and uncertainty. In the EU, pro-cyclical nature has also been associated with agreed rules, which, for some observers, unduly limit scope Using panel data covering close 40 EU non-EU countries, we provide evidence that volatility output gap estimates is not a convincing explanation policies. With exception very large shocks, measures remain ill-timed from stabilisation perspective even when observable politically more meaningful indicators cycle used. We show deviations rules accumulation government debt foster policy. Lawmakers can run based on considerations up point. Once grows too high, leeway stabilise fades. Complying increase in or keep steady course face fluctuation conducive counter-cyclical making.