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The Stability and Growth Pact - Essential and Unfeasible

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  • Jacek Rostowski
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    Abstract

    The arguments for fiscal as well as monetary rules in a monetary union aiming at low inflation, the main weaknesses in the Stability and Growth Pact, and proposals for its reform are reviewed. Our own proposal for reforming the SGP is put forward: a requirement for eurozone Member States to enact entrenched legislation which would forbid budgets that led to public debt exceeding a certain proportion of GDP. Countries which failed to enact such provisions or which rescinded them could not remain in the eurozone. This would solve the key “enforcibility problem” that the SGP faces, without centralizing fiscal power in the European Commission. However, effective reform proposals are unlikely to be politically acceptable, and the SGP is likely to continue to be a dead letter. This suggests that the EMU was implemented prematurely.

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    File URL: http://www.case-research.eu/upload/publikacja_plik/2686680_275%20new.pdf
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    Bibliographic Info

    Paper provided by CASE-Center for Social and Economic Research in its series CASE Network Studies and Analyses with number 0275.

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    Length: 16 Pages
    Date of creation: 2004
    Date of revision:
    Handle: RePEc:sec:cnstan:0275

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    Related research

    Keywords: fiscal rules; Stability and Growth Pact; Economic and Monetary Union;

    References

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    1. Buti, M. & Eijffinger, S.C.W. & Franco, D., 2003. "Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-176184, Tilburg University.
    2. Andrzej Bratkowski & Jacek Rostowski, 2002. "The EU attitude to unilateral euroization: Misunderstandings, real concerns and sub-optimal admission criteria," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(2), pages 445-468, July.
    3. Arnold, Ivo & Lemmen, Jan, 2001. "The Vulnerability of Banks to Government Default Risk in the EMU," International Finance, Wiley Blackwell, vol. 4(1), pages 101-25, Spring.
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    Cited by:
    1. Marek Dabrowski & Artur Radziwill, 2007. "Regional vs. Global Public Goods: The Case of Post-Communist Transition," CASE Network Studies and Analyses 0336, CASE-Center for Social and Economic Research.
    2. Malgorzata Antczak & Marek Dabrowski & Michal Gorzelak, 2005. "Fiscal Challenges Facing the EU New Member States," CASE Network Studies and Analyses 0295, CASE-Center for Social and Economic Research.

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