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Close to Balance or in Surplus. A Policy Maker’s Guide to the Implementation of the Stability and Growth Pact

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  • Michael J. Artis
  • Marco Buti

Abstract

Under the Stability and Growth Pact, countries are committed to achieving medium-term budget positions of “close to balance or in surplus”. The rationale for this commitment is that such budgetary positions would allow for the full working of the built-in stabilizers without triggering the sanction procedures of the Pact. The paper sets out to show how quantifications of the medium-term (‘structural’) requirement can accommodate the desired aim and suggests how fiscal measurement and forecasting errors as well as the budgetary effects of ageing may be allowed for. All in all, broadly balanced budgets in the medium term appear to be ‘roughly right’ for most euro-area countries. Of course, as the cyclical behaviour of the euro-area economy adapts to the new EMU environment, the medium-term targets will need to be re-addressed.

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Bibliographic Info

Paper provided by European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS) in its series EUI-RSCAS Working Papers with number 28.

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Date of creation: 15 Jun 2000
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Handle: RePEc:erp:euirsc:p0026

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Keywords: currency; economic integration; EMU; Euro; European Central Bank; political economy; stability pact;

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References

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