The Stability and Growth Pact: Past Performance and Future Reforms

Amy Filipek () and Till Schreiber
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Amy Filipek: Department of Economics, The College of William and Mary

No 97, Working Papers from Department of Economics, College of William and Mary

Abstract: The ‘Stability and Growth Pact’ aims to constrain excessive fiscal deficits by member countries in the European Monetary Union. It identifies and prescribes sanctions for countries that breach the Maastricht deficit and debt ceilings. Under strong criticism for its apparent favoritism of Germany and France, the SGP was reformed in 2005, after which its deficit procedures became more responsive to the economic climate and were individualized to the country’s circumstances. This paper explores the reformed SGP’s performance, especially in light of the recent Greek debt and global financial crises, and proposes further changes to the Pact, while paying special attention to political feasibility. In it we suggest reforms to the SGP that focus on national ownership of fiscal discipline and an extension of Medium Term Objectives to include a consideration of large external imbalances. We show that the latter can provide an early warning signal for potential future difficulties for public finances.

Keywords: European Monetary Union; fiscal adjustment; external imbalances; global financial crisis (search for similar items in EconPapers)
JEL-codes: F33 F55 H60 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2010-09-16
New Economics Papers: this item is included in nep-cba and nep-eec
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Citations: View citations in EconPapers (3)

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