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The Swedish Fiscal Policy Council, established in 2007, has small resources but a broad remit. In addition to monitoring the long-run sustainability of fiscal policy, the council evaluates the short-run fiscal stance from a cyclical perspective. The council also analyses long-run employment and growth developments. Another task is to evaluate the motives, explanations and research basis for government policies. There is no unique best set-up of a fiscal policy council. Instead, it has to be adapted to the special characteristics of each country. The set-up of the Swedish council appears consistent both with the pre-existing institutional framework, with also other bodies making detailed budget evaluations and macroeconomic forecasts, and with a strong tradition of academic participation in the policy debate. The broad remit could lead to less focus on the fiscal watchdog role. On the other hand, the council plays a "supervicory" role in the general economic policy debate, helping to raise the standards of the doscussion, which is a fundamental democratic objective.

A fundamental overhaul of EU economic governance is needed. The most important reform is a strengthening of national fiscal frameworks, including the establishment of independent fiscal watchdogs in Member States that do not yet have such institutions. At the European level, a permament crisis resolution mechanism should be integrated with both broader macroeconomic surveillance and the sanction system. An independent European fiscal council could, based on macroeconomic risk considerations, decide in advance appropriate haircuts in the event of future sovereign debt restructuring. ; Briefing paper for the European Parliament PE 440.292, /IP/A/ECON/NT/2010-10/, September 2010. Also in Studies in Fiscal Policy 2010/8, Swedish Fiscal Policy Council, Stockholm.

The paper analyses how independent fiscal watchdogs (fiscal policy councils) can strengthen the incentives for fiscal discipline. Several countries have recently established such institutions. By increasing fiscal transparency they can raise the awareness of the long-run costs of current deficits and increase the reputational costs for governments of violating their fiscal rules. Councils that make also normative judgements, where fiscal policy is evaluated against the government's own pre-set objectives, are likely to be more influential than councils that do only positive analysis. To fulfil their role adequately, fiscal watchdogs should be granted independence in much the same way as central banks. There are arguments both in favour and against extending the remit of a fiscal policy council to include also tax, employment and structural policies. Whether or not this should be done depends on the existence of other institutions making macroeconomic forecasts and analysing fiscal policy, the existence of institutions providing independent analysis in other economic policy areas, and the severity of fiscal problems. ; Also published by Helsinki University Print.

The paper distinguishes between the impact of th EMU on nominal wage flexibility and on equilibrium real wage and unemployment levels. A preceived need to increase nominal wage flexibility as a substitute for domestic monetary policy and a tendency to less real wage moderation in the EMU are likely to promote informal bargaining co-ordination and social pacts in the medium run. But such co-ordiantion is not likely to be sustainable in the long run, as it conflicts with other forces working in the direction of decentralization and deunionisation. This could lead to more government intervention in wage setting during a transitional period. Although monetary unification will strengthen the incentives for higher-level transnational co-ordination of wage bargaining, such a development is improbable in view of the co-ordination costs involved. If transitional co-ordination develops, it is most likely to occur within multinational firms.

The paper analyses various mechanism through which monetary union in Europe may affect unemployment. The focus is on the political incentives for labour-market reform. There will be more reform outside than inside the EMU to the extent that a national inflation bias can be reduced. But if there is a precautionary motive for low average unemployment in order to reduce the utility cost of macroeconomic variability, there could be more reform in a monetary union. Labour-market reform to increase wage fexibility as a substitute for domestic monetary policy and transition costs of reform are also analysed. The net effect of monetary union on unemployment is ambiguous.

The paper discusses three aspects of the system for unemployment support. First, active labour market programmes as a means of re-allocating labour from high-unemployment to low-unemployment sectors are analysed, and it is concluded that wage-raising accommodation effects may be a serious problem. Second, the possibility of strengthening incentives for wage moderation by differentiating employee and/or employer contributions to unemployment insurance are discussed. Third, the question is raised whether there may exist other institutional set-ups for providing unemployment support that are more efficient in terms of returning the unemployed to work than government-run systems.

Der Autor entwickelt zunächst einen analytischen Rahmen, mit dem er anschließend die Erfolgsaussichten verschiedener Maßnahmen der aktiven Arbeitsmarktpolitik untersucht. (IAB2)