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Should Europe Get Rid of the Stability and Growth Pact?

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  • Thierry Warin

Abstract

The paper addresses the question of the abolition of the Stability and Growth Pact. More and more authors and policymakers are arising the negative impacts of the European deficit rule on te countries and their ability to respond an asymmetric economic shock. Some others are asking for a redefinition of the Pact. If the focus is only fiscal and in light of the non-respect of the Pact by two of the biggest countries in Europe since its implementation, it could be demonstrated that the SGP needs at least a reexamination. To the converse, if we introduce into the analysis its impacts on the European structural policies, things are different and getting rid of the SGP could hinder the still up-to-date convergence prospective. Indeed, this paper proposed a theoretical analysis of the SGP that emphasizes a new feature of the SGP: a strong incentive to structural reforms.

Suggested Citation

  • Thierry Warin, 2004. "Should Europe Get Rid of the Stability and Growth Pact?," Middlebury College Working Paper Series 0415, Middlebury College, Department of Economics.
    • Handle: RePEc:mdl:mdlpap:0415
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    References listed on IDEAS

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    1. Beetsma, Roel & Uhlig, Harald, 1999. "An Analysis of the Stability and Growth Pact," Economic Journal, Royal Economic Society, vol. 109(458), pages 546-571, October.
    2. Bryson, Jay H., 1994. "Fiscal policy coordination and flexibility under European Monetary Union: Implications for macroeconomic stabilization," Journal of Policy Modeling, Elsevier, vol. 16(6), pages 541-557, December.
    3. Beetsma, R.M.W.J. & Bovenberg, A.L., 1995. "The Interaction of Fiscal and Monetary Policy in a Monetary Union: Balancing Credibility and Flexibility," DELTA Working Papers 95-24, DELTA (Ecole normale supérieure).
    4. Jay H. Bryson, 1994. "Fiscal policy coordination and flexibility under European Monetary Union: implications for macroeconomic stabilization," International Finance Discussion Papers 467, Board of Governors of the Federal Reserve System (U.S.).
    5. Radu Vranceanu & Thierry Warin, 2001. "EMU: Optimal Fiscal Strategy and the Punishment Effectiveness," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 494-504, August.
    6. Barry Eichengreen, 1992. "Is Europe an Optimum Currency Area?," Palgrave Macmillan Books, in: Silvio Borner & Herbert Grubel (ed.), The European Community after 1992, chapter 8, pages 138-161, Palgrave Macmillan.
    7. Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 13(26), pages 66-113.
    8. Antonio Fat·s & Ilian Mihov, 2003. "On Constraining Fiscal Policy Discretion in EMU," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(1), pages 112-131.
    9. Reuven Glick & Michael Hutchison, 1993. "Fiscal policy in monetary unions: Implications for Europe," Open Economies Review, Springer, vol. 4(1), pages 39-65, March.
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    Cited by:

    1. Rokicki, Bartłomiej, . "Reforma Paktu Stabilności i Wzrostu," Gospodarka Narodowa-The Polish Journal of Economics, Szkoła Główna Handlowa w Warszawie / SGH Warsaw School of Economics, vol. 2005(10).
    2. Thierry Warin, 2005. "Stability and Growth Pact: An Index to Trigger an Early Warning Earlier?," Middlebury College Working Paper Series 0502, Middlebury College, Department of Economics.
    3. Bartłomiej Rokicki, 2005. "Reforma Paktu Stabilności i Wzrostu," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 10, pages 3-23.

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    More about this item

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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