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Public Debt and the Future of the EU's Stability and Growth Pact

  • Wenzel, Heinz-Dieter
  • Lackenbauer, Jörg
  • Brösamle, Klaus J.
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    Monetary policy and fiscal policy are connected in various ways. This is why the adoption of the Euro as a common European currency has been accompanied by the setup of the European Union's Stability and Growth Pact, a framework for the coordination of the EU countries' fiscal policies. In this paper, we provide a short overview of the SGP's history of origins and the degree to which the EU Member States adhered to it. Further, we analyse what effects public debt and public deficits have and whether, after all, public debt should be limited in one way or the other. Along these lines, the case for budgetary policy coordination in the special context of the Economic and Monetary Union is presented. After looking at the current SGP framework, we shed light on its main shortcomings and present various reform proposals, all of which are critically questioned. Finally, we present a case for a more flexible country-by-country approach to the interpretation of the deficit criterion (based on some simple algebra).

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    Paper provided by Bamberg University, Bamberg Economic Research Group in its series BERG Working Paper Series with number 50.

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    Date of creation: 2004
    Date of revision:
    Handle: RePEc:zbw:bamber:50
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    1. Bernd Hayo & Matthias Wrede, 2003. "Fiscal Equalisation: Principles and an Application to the European Union," CESifo Working Paper Series 845, CESifo Group Munich.
    2. Szüle, Borbála, 2003. "Inside financial conglomerates: Effects in the Hungarian pension fund markets," BERG Working Paper Series 42, Bamberg University, Bamberg Economic Research Group.
    3. Heinz-Dieter Wenzel & Matthias Wrede, 1993. "Golden Rule Fiscal Policy," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 129(II), pages 123-150, June.
    4. Treier, Volker, 1999. "Unemployment in reforming countries: Causes, fiscal impacts and the success of transformation," BERG Working Paper Series 29, Bamberg University, Bamberg Economic Research Group.
    5. Wrede, Matthias, 1999. "A note on reliefs for traveling expenses to work," BERG Working Paper Series 30, Bamberg University, Bamberg Economic Research Group.
    6. Kremer, Jana, 1999. "Arbeitslosigkeit und Steuerpolitik," BERG Working Paper Series 32, Bamberg University, Bamberg Economic Research Group.
    7. Thiel, Elke, 2004. "European Integration of Albania : Economic Aspects," BERG Working Paper Series 49, Bamberg University, Bamberg Economic Research Group.
    8. Malaj, Arben & Mema, Fatmir, 2003. "Strategic privatisation: Its achievements and challenges," BERG Working Paper Series 41, Bamberg University, Bamberg Economic Research Group.
    9. Nusser, Michael, 1999. "The implications of wage structure rigidity on human capital accumulation, economic growth and unemployment: A Schumpeterian approach to endogenous growth theory," BERG Working Paper Series 28, Bamberg University, Bamberg Economic Research Group.
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