The Stability and Growth Pact - Essential and Unfeasible
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 Countries which failed to enact such provisions or which rescinded them could not remain in the eurozone.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.
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- Arnold, Ivo & Lemmen, Jan, 2001.
"The Vulnerability of Banks to Government Default Risk in the EMU,"
Wiley Blackwell, vol. 4(1), pages 101-25, Spring.
- Ivo J. M. Arnold & Jan J.G. Lemmen, 1999. "The Vulnerability of Banks to Government default risk in the EMU," FMG Special Papers sp115, Financial Markets Group.
- 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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