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Reforming the Stability and Growth Pact: Breaking the Ice

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  • Catherine Mathieu

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Henri Sterdyniak

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

This paper presents a critical assessment of the Stability and Growth Pact (SGP). Section 2 recalls the fiscal policy framework in the euro area. Section 3 provides an assessment of the first five years of the SGP. Section 4 addresses the weaknesses of the procedures: arbitrary criteria, insufficient economic policy co-ordination. Section 5 discusses European Commission's recent proposals: strengthening its influence on national fiscal policies; considering 'close-to-balance or in surplus' underlying budgetary positions. Section 6 discusses recent academic proposals: budgetary federalism, golden rule, permanent balance rule, public expenditure rule, fiscal policy committees, public debt surveillance... In section 7 we suggest that national budgetary policies should be responsible for managing the inflationproduction trade-off, under a medium term inflation objective, while monetary policy would target interest rates. This policy mix would give better outcomes in terms of economic stabilisation than the existing framework.

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  • Catherine Mathieu & Henri Sterdyniak, 2003. "Reforming the Stability and Growth Pact: Breaking the Ice," SciencePo Working papers Main hal-00972861, HAL.
  • Handle: RePEc:hal:spmain:hal-00972861
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    1. repec:kap:iaecre:v:11:y:2005:i:1:p:29-38 is not listed on IDEAS
    2. Judita Cuculic & Michael Faulend & Vedran Sosic, 2004. "Fiscal aspects of accession: can we anter the European Union with a budgetary deficit?," Chapters in books, in: Katarina Ott (ed.), Croatian Accession to the European Union: Institutional Challenges, volume 2, chapter 3, pages 49-77, Institute of Public Finance.
    3. Thierry Warin, 2005. "The Hidden Structural Features of the Fiscal Rule: A European Saga," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 11(1), pages 29-38, February.
    4. Bartłomiej Rokicki, 2005. "Reforma Paktu Stabilności i Wzrostu," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 10, pages 3-23.
    5. Poplawski Ribeiro, Marcos & Beetsma, Roel, 2008. "The political economy of structural reforms under a deficit restriction," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 179-198, March.
    6. Sébastien Pommier, 2008. "The Use of Fiscal Policy in EMU: First Appraisal and Future Prospects," EKONOMIAZ. Revista vasca de Economía, Gobierno Vasco / Eusko Jaurlaritza / Basque Government, vol. 69(03), pages 28-45.
    7. Emmanuel MOUSSONE, 2010. "Insertion des pays de la zone franc africaine dans le commerce mondial : étude d’une spécialisation appauvrissante et le problème du financement de l’économie (Insertion of the African Franc Zone Coun," Working Papers 231, Laboratoire de Recherche sur l'Industrie et l'Innovation. ULCO / Research Unit on Industry and Innovation.

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