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The Stability and Growth Pact - crisis and reform

Author

Listed:
  • Schuknecht, Ludger
  • Moutot, Philippe
  • Rother, Philipp
  • Stark , Jürgen

Abstract

The sovereign debt crisis in the euro area is a symptom of policy failures and deficiencies in – among other things – fiscal policy coordination. The first nine years of the euro were not used effectively in order to improve public finances, while the Stability and Growth Pact was watered down. Spillovers from the financial and economic crisis compounded fiscal difficulties in the euro area, especially in certain member countries. This paper looks back at the history of fiscal policies and rules in Economic and Monetary Union (EMU). It makes proposals to strengthen fiscal policy governance that go well beyond the legislation set to be adopted in autumn 2011. The authors consider these additional governance measures to be essential for effective policy coordination and sound public finances in the future. JEL Classification: E52, E58

Suggested Citation

  • Schuknecht, Ludger & Moutot, Philippe & Rother, Philipp & Stark , Jürgen, 2011. "The Stability and Growth Pact - crisis and reform," Occasional Paper Series 129, European Central Bank.
  • Handle: RePEc:ecb:ecbops:20110129
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    File URL: http://www.ecb.europa.eu/pub/pdf/scpops/ecbocp129.pdf
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    References listed on IDEAS

    as
    1. Lars Jonung & Eoin Drea, 2009. "The euro: It can't happen, It's a bad idea, It won't last. US economists on the EMU, 1989-2002," European Economy - Economic Papers 2008 - 2015 395, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Hauptmeier, Sebastian & Sanchez-Fuentes, A. Jesus & Schuknecht, Ludger, 2011. "Towards expenditure rules and fiscal sanity in the euro area," Journal of Policy Modeling, Elsevier, vol. 33(4), pages 597-617, July.
    3. van Riet, Ad, 2010. "Euro area fiscal policies and the crisis," Occasional Paper Series 109, European Central Bank.
    4. Holm-Hadulla, Fédéric & Hauptmeier, Sebastian & Rother, Philipp, 2010. "The impact of numerical expenditure rules on budgetary discipline over the cycle," Working Paper Series 1169, European Central Bank.
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    Citations

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    Cited by:

    1. de Groot, Oliver & Holm-Hadulla, Fédéric & Leiner-Killinger, Nadine, 2015. "Cost of borrowing shocks and fiscal adjustment," Journal of International Money and Finance, Elsevier, vol. 59(C), pages 23-48.
    2. Ioannou, Demosthenes & Jamet, Jean-Francois & Kleibl, Johannes, 2015. "Spillovers and euroscepticism," Working Paper Series 1815, European Central Bank.
    3. Thushyanthan Baskaran & Zohal Hessami, 2017. "Monetary integration, soft budget constraints, and the EMU sovereign debt crises," Economics and Politics, Wiley Blackwell, vol. 29(3), pages 252-275, November.
    4. repec:ces:ifodic:v:12:y:2014:i:1:p:19108863 is not listed on IDEAS
    5. Nikki Panjer & Leo de Haan & Jan Jacobs, 2017. "Is fiscal policy in the euro area Ricardian?," DNB Working Papers 562, Netherlands Central Bank, Research Department.
    6. Goda, Thomas & Onaran, Özlem & Stockhammer, Engelbert, 2014. "A case for redistribution? income inequality and wealth concentration in the recent crisis," Greenwich Papers in Political Economy 14056, University of Greenwich, Greenwich Political Economy Research Centre.
    7. repec:bla:jcmkts:v:55:y:2017:i:6:p:1221-1238 is not listed on IDEAS
    8. Karsai Zoltán-Krisztián, 2012. "Does The Maastricht Convergence Criteria Work?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 107-114, December.
    9. Damir Šehović, 2015. "Analysis of Fiscal Rules in the European Monetary Union," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 4(1), pages 19-33.
    10. Antonio Estella, 2013. "Determinants of Spain's decision to leave the European Monetary Union," RSCAS Working Papers 2013/56, European University Institute.
    11. Ludger Schuknecht, 2013. "Has Public Insurance Gone Too Far?," CESifo Working Paper Series 4217, CESifo Group Munich.
    12. Jakob de Haan & Jeroen Hessel & Niels Gilbert, 2014. "Reforming the architecture of EMU: Ensuring stability in Europe," DNB Working Papers 446, Netherlands Central Bank, Research Department.
    13. Creel, Jérôme & Hubert, Paul & Saraceno, Francesco, 2013. "An assessment of the Stability and Growth Pact reform in a small-scale macro-framework," Journal of Economic Dynamics and Control, Elsevier, vol. 37(8), pages 1567-1580.
    14. Ansgar Belke & Jens Klose, 2017. "Equilibrium Real Interest Rates and Secular Stagnation: An Empirical Analysis for Euro Area Member Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 55(6), pages 1221-1238, November.
    15. Paul J.J. Welfens, 2012. "Towards a Euro Fiscal Union: Reinforced Fiscal and Macroeconomic Coordination and Surveillance is Not Enough," EIIW Discussion paper disbei191, Universitätsbibliothek Wuppertal, University Library.
    16. Thushyanthan Baskaran & Zohal Hessami, 2011. "A Tale of Five PIIGS: Soft Budget Constraints and the EMU Sovereign Debt Crises," Working Paper Series of the Department of Economics, University of Konstanz 2011-45, Department of Economics, University of Konstanz.
    17. Gulbahar UCLER & Hale KIRMIZIOGLU, 2015. "The Reasons of Eurozone Sovereign Debt Crisis and an Empirical Analysis over Permanency of the Crisis," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 86-96.
    18. Antonio Estella, 2013. "Determinants of Spain’s decision to leave the European Monetary Union," EUI-RSCAS Working Papers 56, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    19. Ermal Hitaj & Yasin Kursat Onder, 2013. "Fiscal Discipline in WAEMU; Rules, Institutions, and Markets," IMF Working Papers 13/216, International Monetary Fund.
    20. Martin Berghausen, 2014. "Public Debt in the Eurozone," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(1), pages 55-57, 04.
    21. Bergman, U. Michael & Hutchison, Michael M. & Jensen, Svend E. Hougaard, 2016. "Promoting sustainable public finances in the European Union: The role of fiscal rules and government efficiency," European Journal of Political Economy, Elsevier, vol. 44(C), pages 1-19.

    More about this item

    Keywords

    EU institutional reform; fiscal deficits; fiscal rules; public debt; Stability and Growth Pact;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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