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The Stability and Growth Pact from the perspective of the new member states

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  • Orban, Gabor
  • Szapary, Gyorgy

Abstract

The purpose of this paper is to examine the fiscal characteristics of the new members in the light of the requirements of the SGP and the criticisms levelled against the Pact and to see in what ways their initial conditions differ from those faced by the current euro zone countries in the run-up to EMU. Overall, because of the lower debt levels and greater yield convergence already achieved, the new members will be able to rely less on gains from yield convergence than the current eurozone members were able to do in the run-up to EMU. EU accession will also have a negative net impact on the budgets of the new members in the early years of membership. We also look at the cyclical sensitivities of the budgets and find that in the new members the smoothing capacity of the automatic stabilizers might be weaker than in the current euro zone members. Beyond these general characteristics, we also emphasize that there are large differences in the starting fiscal positions of the new members. Some of the policy implications of our findings are discussed.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 26 (2004)
Issue (Month): 7 (October)
Pages: 839-864

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Handle: RePEc:eee:jpolmo:v:26:y:2004:i:7:p:839-864

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Web page: http://www.elsevier.com/locate/inca/505735

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References

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  1. Buti, Marco & Eijffinger, Sylvester C W & Franco, Daniele, 2003. "Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment?," CEPR Discussion Papers 3692, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Menguy, Séverine, 2008. "A dynamic rule applied to the threshold imposed on the European budgetary deficits," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 1093-1105.
  2. Philipp Paulus, 2006. "The final blow to the Stability Pact? EMU enlargement and government debt," Otto-Wolff-Institut Discussion Paper Series 03/2006, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.
  3. Ferré Carracedo, Montserrat, 2011. "The effects of uncertainty about countries' compliance with the Stability and Growth Pact," Working Papers 2072/169686, Universitat Rovira i Virgili, Department of Economics.
  4. Jesmin Rahman, 2010. "Absorption Boom and Fiscal Stance," IMF Working Papers 10/97, International Monetary Fund.
  5. Zsolt Darvas & György Szapáry, 2008. "Euro Area Enlargement and Euro Adoption Strategies," Working Papers 0801, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
  6. Schnabl, Gunther & Ziegler, Christina, 2011. "Exchange rate and wage policies in Central and Eastern Europe," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 347-360, May.
  7. Hughes Hallett, Andrew & Lewis, John, 2007. "Debt, deficits, and the accession of the new member States to the Euro," European Journal of Political Economy, Elsevier, vol. 23(2), pages 316-337, June.
  8. Ondřej Schneider & Jan Zápal, 2005. "Fiscal Policy in New EU Member States: Go East, Prudent Man!," Working Papers IES 76, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005.
  9. Buti, M. & Eijffinger, S.C.W. & Franco, D., 2005. "The Stability pact Pains: A Forward-Looking Assessment of the Reform Debate," Discussion Paper 2005-101, Tilburg University, Center for Economic Research.
  10. Dybczak, Kamil & Melecky, Martin, 2012. "EU Fiscal Stance Vulnerability: Are the Old Members the Gold Members?," MPRA Paper 42837, University Library of Munich, Germany.
  11. Buti, Marco & Sapir, André, 2006. "Fiscal Policy in Europe: The Past and Future of EMU Rules from the Perspective of Musgrave and Buchanan," CEPR Discussion Papers 5830, C.E.P.R. Discussion Papers.
  12. Lucjan T. Orlowski & Kirsten Lommatzsch, 2005. "Bond Yield Compression in the Countries Converging to the Euro," William Davidson Institute Working Papers Series wp799, William Davidson Institute at the University of Michigan.
  13. Jan Zápal, 2006. "Relation between Cyclically Adjusted Budget Balance and Growth Accounting Method of Deriving ‘Net Fiscal Effort’," Working Papers IES 2006/05, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2006.
  14. Ondřej Schneider & Jan Zápal, 2006. "What Are Their Words Worth? Political Plans And Economic Pains Of Fiscal Consolidations In New EU Member States," Working Papers IES 2006/13, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2006.
  15. Kocenda, Evzen & Kutan, Ali M. & Yigit, Taner M., 2008. "Fiscal convergence in the European Union," The North American Journal of Economics and Finance, Elsevier, vol. 19(3), pages 319-330, December.
  16. Marco Buti, 2006. "Will the new stability and growth pact succeed? An economic and political perspective," European Economy - Economic Papers 241, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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