IDEAS home Printed from
   My bibliography  Save this article

The stability and growth pact : an eventful history


  • Geert Langenus

    (National Bank of Belgium, Research Department)


When it was adopted in 1997 the stability and growth pact was considered as one of the cornerstones of the European monetary union. However, against the background of the economic downturn starting at the turn of the century, this perception changed and some observers criticised the pact for unduly constraining governments’ fiscal room for manoeuvre. This sparked a long debate on the appropriateness of the fiscal rules in the monetary union that has finally ended in March 2005 when a political agreement was reached in the Council of the European Union that announces substantial changes to the pact. This article first recalls the reasons for fiscal rules, especially in a monetary union with a fragmented budgetary policy, and the main provisions of the original pact. It then shows that despite the strengthening of the fiscal rules nearly all EU-15 Member States have significantly relaxed budgetary discipline after 1997, i.e. the year in which compliance with the Maastricht convergence criteria was tested, which led to significant budgetary slippages in a number of countries. It is argued that this is due to specific institutional, political and statistical factors. Finally, the reform of the pact is assessed. Without prejudging the application of the new framework, the fiscal rules are found to be significantly weakened and there is a clear shift towards a more judgement-based institutional framework.

Suggested Citation

  • Geert Langenus, 2005. "The stability and growth pact : an eventful history," Economic Review, National Bank of Belgium, issue ii, pages 65-81, June.
  • Handle: RePEc:nbb:ecrart:y:2005:m:june:i:ii:p:65-81

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco.
    2. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2007. "Direct Investment, Rising Real Wages and the Absorption of Excess Labor in the Periphery," NBER Chapters,in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 103-132 National Bureau of Economic Research, Inc.
    3. Nouriel Roubini & Brad Setser, 2005. "Will the Bretton Woods 2 regime unravel soon? the risk of a hard landing in 2005-2006," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:nbb:ecrart:y:2015:m:december:i:iii:p:87-107 is not listed on IDEAS
    2. L. Van Meensel & D. Dury, 2008. "The use and effectiveness of fiscal rules and independent fiscal institutions," Economic Review, National Bank of Belgium, issue ii, pages 69-84, June.
    3. P. Bisciari & W. Melyn & L. Van Meensel, 2014. "Outlook for the finances of the Communities and Regions," Economic Review, National Bank of Belgium, issue ii, pages 04-22, September.

    More about this item


    Stability and growth pact; fiscal rules; European monetary policy;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H69 - Public Economics - - National Budget, Deficit, and Debt - - - Other
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbb:ecrart:y:2005:m:june:i:ii:p:65-81. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.