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Revisiting EMU's Stability Pact: A Pragmatic Way Forward

Author

Listed:
  • Marco Buti
  • Sylvester Eijffinger
  • Daniele Franco

Abstract

The Stability and Growth Pact is under fire. Some countries are meeting major problems in sticking to the rules. Proposals to reform the Pact or ditch it altogether abound. The alleged weaknesses of the Pact tend to reflect trade-offs typical of supra-national arrangements. This aspect has to be factored in when considering reforms of the current fiscal rules: there is no miracle solution. EMU without rules would be an interesting experiment, but a risky policy option. Given the existing degree of political integration in EMU, internal adjustment rather than attempting to redesign the rules from scratch appears a more suitable way forward. Redefining the medium-term budgetary target, improving transparency, tackling the pro-cyclical fiscal bias in good times, moving towards non-partisan application of the rules, and improving transparency in the data can achieve both stronger discipline and higher flexibility. Copyright 2003, Oxford University Press.

Suggested Citation

  • Marco Buti & Sylvester Eijffinger & Daniele Franco, 2003. "Revisiting EMU's Stability Pact: A Pragmatic Way Forward," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(1), pages 100-111.
    • Handle: RePEc:oup:oxford:v:19:y:2003:i:1:p:100-111
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    Cited by:

    1. Fiorella Kostoris Padoa Schioppa, 2006. "The 2005 Reform of the Stability and Growth Pact: Too Little, Too Late?," Bruges European Economic Research Papers 6, European Economic Studies Department, College of Europe.
    2. repec:spo:wpmain:info:hdl:2441/53r60a8s3kup1vc9k2c8h4u2h is not listed on IDEAS
    3. Rui Henrique Alves & Oscar Afonso, 2008. "Fiscal Federalism in the European Union: How Far Are We?," Palgrave Macmillan Books, in: Jesús Ferreiro & Giuseppe Fontana & Felipe Serrano (ed.), Fiscal Policy in the European Union, chapter 1, pages 6-24, Palgrave Macmillan.
    4. Marco Buti & Martin Larch & Fabio Balboni, 2009. "Monetary and fiscal policy interactions in the EMU when cyclical conditions are uncertain," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 36(1), pages 21-44, February.
    5. Fabio Balboni & Marco Buti & Martin Larch, 2007. "ECB vs Council vs Commission: Monetary and fiscal policy interactions in the EMU when cyclical conditions are uncertain," European Economy - Economic Papers 2008 - 2015 277, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    6. Afonso, Oscar & Alves, Rui Henrique & Vasconcelos, Paulo B., 2009. "Public deficits and economic growth," Economic Modelling, Elsevier, vol. 26(5), pages 1101-1109, September.
    7. repec:spo:wpmain:info:hdl:2441/eul7jlnf19iq8tdp0vlfv63n5 is not listed on IDEAS
    8. Hetschko, Clemens & Quint, Dominic & Thye, Marius, 2012. "Nationale Schuldenbremsen für die Länder der Europäischen Union: Taugt das deutsche Modell als Vorbild?," Discussion Papers 2012/12, Free University Berlin, School of Business & Economics.
    9. James Forder, 2005. "The limits of `independence' and the policy of the ECB^," Public Choice, Springer, vol. 125(3), pages 431-444, December.
    10. Leopold Diebalek & Walpurga Köhler-Töglhofer & Doris Prammer, 2006. "Reform of the Stability and Growth Pact," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/06, pages 78-109.
    11. Leopold Diebalek & Doris Prammer, 2006. "Reform of the Stability and Growth Pact," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 78-109.
    12. Jean-Paul Fitoussi & Francesco Saraceno, 2004. "The Brussels-Frankfurt-Washington Consensus. Old and New Tradeoffs in Economics," Documents de Travail de l'OFCE 2004-02, Observatoire Francais des Conjonctures Economiques (OFCE).
    13. Jean-Paul Fitoussi & Francesco Saraceno, 2013. "European economic governance: the Berlin–Washington Consensus," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 37(3), pages 479-496.
    14. repec:spo:wpmain:info:hdl:2441/6761 is not listed on IDEAS
    15. Eijffinger, Sylvester & Governatori, Matteo, 2004. "Fiscal and Monetary Interaction: The Role of Asymmetries of the Stability and Growth Pact in EMU," CEPR Discussion Papers 4647, C.E.P.R. Discussion Papers.
    16. Ana Sabic, 2006. "Reform of the Stability and Growth Pact," Financial Theory and Practice, Institute of Public Finance, vol. 30(3), pages 283-293.
    17. Bonatti, Luigi & Cristini, Annalisa, 2008. "Breaking the Stability Pact: Was it predictable?," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 793-810.
    18. F.K. Siebrits & E. Calitz, 2004. "Should South Africa Adopt Numerical Fiscal Rules?1," South African Journal of Economics, Economic Society of South Africa, vol. 72(4), pages 759-783, September.
    19. Rui Alves & Oscar Afonso, 2007. "The "New" Stability and Growth Pact: More Flexible, Less Stupid?," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 42(4), pages 218-225, July.
    20. Ioannou, Demosthenes & Stracca, Livio, 2014. "Have the euro area and EU governance worked? Just the facts," European Journal of Political Economy, Elsevier, vol. 34(C), pages 1-17.

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