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The Stability and Growth Pact since 2011: More complex – but also stricter and less procyclical?

Author

Listed:
  • Doris Prammer

    (Oesterreichische Nationalbank)

  • Lukas Reiss

    (Oesterreichische Nationalbank, Economic Analysis Division)

Abstract

The European fiscal framework has been extensively reformed since 2011. Nevertheless, it is consistently criticized for its procyclicality, its complexity and its large consolidation requirements. We provide a general overview of European fiscal rules. Then we argue that while recent reforms have undoubtedly made the Stability and Growth Pact more complex, one cannot make such a general statement concerning its procyclicality and its strictness. The preventive arm of the SGP has been made both stricter and less procyclical, while the newly introduced debt benchmark is not only very complex, but also more procyclical than the rest of the SGP. Furthermore, the effect on the procyclicality of Excessive Deficit Procedures is ambivalent; procyclicality was increased by the introduction of intermediate headline targets, but also decreased via new effective action indicators.

Suggested Citation

  • Doris Prammer & Lukas Reiss, 2016. "The Stability and Growth Pact since 2011: More complex – but also stricter and less procyclical?," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 33-53.
    • Handle: RePEc:onb:oenbmp:y:2016:i:1:b:3
    as

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    File URL: https://www.oenb.at/dam/jcr:6bff50af-6c2f-4045-a37f-f5fc2986ea8d/mop_2016_q1_analyses03.pdf
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    References listed on IDEAS

    as
    1. Johannes Holler & Lukas Reiss, 2011. "What to Expect from the Latest Reform of the Stability and Growth Pact," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 85-98.
    2. Richard Morris & Hedwig Ongena & Ludger Schuknecht, 2006. "The reform and implementation of the Stability and Growth Pact," Occasional Paper Series 47, European Central Bank.
    3. Schuknecht, Ludger & Morris, Richard & Ongena, Hedwig, 2006. "The reform and implementation of the Stability and Growth Pact," Occasional Paper Series 47, European Central Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Alfred Katterl & Walpurga Köhler-Töglhofer, 2018. "Stabilization and shock absorption instruments in the EU and the euro area – the status quo," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q2/18, pages 87-110.
    2. Doris Prammer & Lukas Reiss, 2019. "(How) has EMU affected fiscal policy in Austria?," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1-Q2-/19, pages 71-84.
    3. Doris Prammer & Lukas Reiss, 2018. "How to increase fiscal stabilization at the euro area level?," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q2/18, pages 111-131.
    4. Niels D. Gilbert & Jasper F.M. Jong, 2017. "Do European fiscal rules induce a bias in fiscal forecasts? Evidence from the Stability and Growth Pact," Public Choice, Springer, vol. 170(1), pages 1-32, January.

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    More about this item

    Keywords

    Stability and Growth Pact; fiscal rules; fiscal policy;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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