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The Stability and Growth Pact - Essential and Unfeasible

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  • Jacek Rostowski

Abstract

The arguments for fiscal as well as monetary rules in a monetary union aiming at low inflation, the main weaknesses in the Stability and Growth Pact, and proposals for its reform are reviewed. Our own proposal for reforming the SGP is put forward: a requirement for eurozone Member States to enact entrenched legislation which would forbid budgets that led to public debt exceeding a certain proportion of GDP. Countries which failed to enact such provisions or which rescinded them could not remain in the eurozone. This would solve the key “enforcibility problem” that the SGP faces, without centralizing fiscal power in the European Commission. However, effective reform proposals are unlikely to be politically acceptable, and the SGP is likely to continue to be a dead letter. This suggests that the EMU was implemented prematurely.

Suggested Citation

  • Jacek Rostowski, 2004. "The Stability and Growth Pact - Essential and Unfeasible," CASE Network Studies and Analyses 0275, CASE-Center for Social and Economic Research.
  • Handle: RePEc:sec:cnstan:0275
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    File URL: http://www.case-research.eu/upload/publikacja_plik/2686680_275%20new.pdf
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    References listed on IDEAS

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    1. Arnold, Ivo & Lemmen, Jan, 2001. "The Vulnerability of Banks to Government Default Risk in the EMU," International Finance, Wiley Blackwell, vol. 4(1), pages 101-125, Spring.
    2. Andrzej Bratkowski & Jacek Rostowski, 2002. "The EU attitude to unilateral euroization: Misunderstandings, real concerns and sub-optimal admission criteria," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(2), pages 445-468, July.
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    Cited by:

    1. Marek Dabrowski & Artur Radziwill, 2007. "Regional vs. Global Public Goods: The Case of Post-Communist Transition," CASE Network Studies and Analyses 0336, CASE-Center for Social and Economic Research.
    2. Lucjan T Orlowski, 2005. "Monetary Policy Adjustments on the Final Passage towards the Euro," Macroeconomics 0503022, EconWPA.
    3. Marek Dabrowski & Artur Radziwill, 2007. "Regional vs. Global Public Goods: The Case of Post-Communist Transition," CASE Network Studies and Analyses 0336, CASE-Center for Social and Economic Research.

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