The Euro and the Stability Pact
AbstractThis paper begins by discussing the inherent conflict between the simultaneous existence of a single currency for the countries of the European Economic and Monetary Union (EMU) and the independent fiscal policies of those countries. The Stability and Growth Pact was an attempt to reconcile that conflict. I describe how EMU governments have chosen to ignore the Stability Pact's constraint on budget deficits and how they sought to undermine it by changing the rules themselves. The final part of the paper describes the actual resolution of the issue by the agreement reached at the end of March 2005 by the European Council. The new policy effectively abandons the Stability Pact and leaves the way open to much larger sustained deficits.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11249.
Date of creation: Apr 2005
Date of revision:
Publication status: published as Feldstein, Martin. "The Euro And The Stability Pact," Journal of Policy Modeling, 2005, v27(4,Jun), 421-426.
Note: EFG IFM PE POL
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- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-09 (All new papers)
- NEP-EEC-2005-04-09 (European Economics)
- NEP-MON-2005-04-09 (Monetary Economics)
- NEP-PKE-2005-04-09 (Post Keynesian Economics)
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