The Stability and Growth Pact - Essential and Unfeasible
AbstractThe 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 Countries which failed to enact such provisions or which rescinded them could not remain in the eurozone.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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Bibliographic InfoPaper provided by CASE-Center for Social and Economic Research in its series CASE Network Studies and Analyses with number 0275.
Length: 16 Pages
Date of creation: 2004
Date of revision:
fiscal rules; Stability and Growth Pact; Economic and Monetary Union;
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