ADAPTING UNDER PRESSURE: HOW NATIONAL FISCAL RULES WERE ADJUSTED IN RESPONSE TO A GLOBAL ECONOMIC SHOCK

This study aims to conduct a comparative analysis of the adjustment of fiscal rules in response to the COVID-19 shock, thereby answering the question of whether this was an expression of healthy institutional flexibility or the beginning of an erosion of fiscal discipline. Using a qualitative, comparative method on two cases with distinct institutional settings - the European Union (EU) and several Latin American countries (Chile, Brazil, and Colombia) - the paper employs process-tracing and policy discourse analysis. The results show that the answer is critically dependent on the quality of fiscal institutions. In the EU, strong supranational institutions and a pre-defined escape clause allowed for controlled flexibility without eroding credibility. Conversely, in the Latin American countries, the absence of similar mechanisms and weaker supervisory institutions meant that ad-hoc adjustments posed a risk of undermining long-term fiscal discipline. Therefore, the study affirms that building resilient fiscal frameworks requires two key elements: integrating clear, transparent escape clauses and empowering independent fiscal institutions to oversee their implementation and ensure a credible path back to discipline.