Fiscal Policy Coordination in EMU: Should it Go Beyond the SGP?

Sixten Korkman

Chapter 12 in The Stability and Growth Pact, 2001, pp 287-310 from Palgrave Macmillan

Abstract: Abstract The fiscal policy requirements of EMU have attracted much attention in the Community.1 Since the mid-1990s the discussion has focused almost exclusively on budget discipline in the context of the Stability and Growth Pact (SGP). The SGP stipulates rules which, if adhered to by member states, ensure that ‘excessive’ general government financial deficits are avoided. This should be helpful for the macro- economic policy mix by containing upward pressure on interest rates, while at the same time creating room for the automatic fiscal stabilisers to operate. The SGP may also improve the functioning of the economy in more indirect ways: sound public finances, in combination with price stability, should reduce uncertainty of expectations, enhance confidence of market participants, and strengthen incentives for social partners and governments to tackle structural problems hampering the functioning of markets.

Keywords: Exchange Rate; Member State; Monetary Policy; Fiscal Policy; Euro Area (search for similar items in EconPapers)
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-62926-4_12

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DOI: 10.1057/9780230629264_12

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