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The Stability and Growth Pact from the Perspective Of the New Member States

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  • Gábor Orbán

    ()

  • György Szapáry

    ()

Abstract

The purpose of this paper is to examine the fiscal characteristics of the new members in the light of the requirements of the SGP and the criticisms levelled against the Pact and to see in what ways their initial conditions differ from those faced by the current euro zone countries in the run-up to the adoption of the euro. Overall, because of the lower debt levels and greater yield convergence already achieved, the new members will be able to rely less on gains from yield convergence than the current euro zone members were able to do. EU accession will also have a negative net impact on the budgets of the new members in the early years of membership. We also look at the cyclical sensitivities of the budgets and find that in the new members the smoothing capacity of the automatic stabilizers might be weaker than in the current euro zone members. Beyond these general characteristics, we also emphasize that there are large differences in the starting fiscal positions of the new members. Some of the policy implications of our findings are discussed.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2004-709.

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Length: 47 pages
Date of creation: 01 Jul 2004
Date of revision:
Handle: RePEc:wdi:papers:2004-709

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Keywords: EU enlargement; fiscal policy; fiscal rules; Stability and Growth Pact;

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Citations

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Cited by:
  1. Menguy, Séverine, 2008. "A dynamic rule applied to the threshold imposed on the European budgetary deficits," Journal of Policy Modeling, Elsevier, Elsevier, vol. 30(6), pages 1093-1105.
  2. Zsolt Darvas & György Szapáry, 2008. "Euro Area Enlargement and Euro Adoption Strategies," Working Papers, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest 0801, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
  3. Lucjan T. Orlowski & Kirsten Lommatzsch, 2005. "Bond Yield Compression in the Countries Converging to the Euro," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan wp799, William Davidson Institute at the University of Michigan.
  4. Hughes Hallett, Andrew & Lewis, John, 2007. "Debt, deficits, and the accession of the new member States to the Euro," European Journal of Political Economy, Elsevier, Elsevier, vol. 23(2), pages 316-337, June.
  5. Buti, Marco & Eijffinger, Sylvester C W & Franco, Daniele, 2005. "The Stability Pact Pains: A Forward-Looking Assessment of the Reform Debate," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5216, C.E.P.R. Discussion Papers.
  6. Buti, Marco & Sapir, André, 2006. "Fiscal Policy in Europe: The Past and Future of EMU Rules from the Perspective of Musgrave and Buchanan," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5830, C.E.P.R. Discussion Papers.
  7. Philipp Paulus, 2006. "The final blow to the Stability Pact? EMU enlargement and government debt," Otto-Wolff-Institut Discussion Paper Series, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland 03/2006, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.
  8. Jan Zápal, 2006. "Relation between Cyclically Adjusted Budget Balance and Growth Accounting Method of Deriving ‘Net Fiscal Effort’," Working Papers IES, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies 2006/05, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2006.
  9. Schnabl, Gunther & Ziegler, Christina, 2011. "Exchange rate and wage policies in Central and Eastern Europe," Journal of Policy Modeling, Elsevier, Elsevier, vol. 33(3), pages 347-360, May.
  10. Ferré Carracedo, Montserrat, 2011. "The effects of uncertainty about countries' compliance with the Stability and Growth Pact," Working Papers 2072/169686, Universitat Rovira i Virgili, Department of Economics.
  11. Jesmin Rahman, 2010. "Absorption Boom and Fiscal Stance," IMF Working Papers 10/97, International Monetary Fund.
  12. Dybczak, Kamil & Melecky, Martin, 2014. "EU fiscal stance vulnerability: Are the old members the gold members?," Economic Modelling, Elsevier, Elsevier, vol. 38(C), pages 87-101.
  13. Kocenda, Evzen & Kutan, Ali M. & Yigit, Taner M., 2008. "Fiscal convergence in the European Union," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 19(3), pages 319-330, December.
  14. Ondřej Schneider & Jan Zápal, 2006. "What Are Their Words Worth? Political Plans And Economic Pains Of Fiscal Consolidations In New EU Member States," Working Papers IES, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies 2006/13, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2006.
  15. Ondřej Schneider & Jan Zápal, 2005. "Fiscal Policy in New EU Member States: Go East, Prudent Man!," Working Papers IES, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies 76, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005.
  16. Marco Buti, 2006. "Will the new stability and growth pact succeed? An economic and political perspective," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 241, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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