Fiscal Policy and Macroeconomic Performance in the Euro Area: Lessons for the Future

Eckhard Hein and Achim Truger

Chapter 8 in Euroland and the World Economy, 2007, pp 154-183 from Palgrave Macmillan

Abstract: Abstract Since the start of the Economic and Monetary Union (EMU) fiscal policy in the Euro Area has been dominated by the Stability and Growth Pact (SGP). However, the SGP has been unsuccessful in fulfilling both its goals, fiscal sustainability and supporting economic growth: In recent years, more and more countries have exceeded the 3 per cent of GDP limit for the budget deficit. At the same time, macroeconomic performance has been unsatisfactory, with the Euro Area economy only slowly recovering from the post-2000 stagnation. The prolonged stagnation as well as the ongoing fiscal problems have revived the macroeconomic debate on a reform of the SGP. A reform was finally introduced after a legal conflict between the European Commission and the European Council about the Council’s right to simply ignore the Commission’s recommendation to further pursue the ‘excessive deficit procedure’ (EDP) against France and Germany. However, the reform did not fundamentally change the SGP. Therefore, the economic and political debates on SGP reforms continue. In this chapter we would like to contribute to this debate. After a rather detailed account of fiscal policy developments and their impact on the Euro Area economy, we present a modified expenditure path concept as an alternative to the current SGP.

Keywords: Monetary Policy; Fiscal Policy; Euro Area; European Central Bank; Budget Balance (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (17)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Fiscal Policy and Macroeconomic Performance in the Euro area - Lessons for the Future (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-37755-4_9

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230377554

DOI: 10.1057/9780230377554_9

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().