Does EMU Need a Stability Pact?

Roel Beetsma

Chapter 2 in The Stability and Growth Pact, 2001, pp 23-52 from Palgrave Macmillan

Abstract: Abstract Fiscal rules are at the centre of the public policy debate. For example, in the United States, some years ago an attempt to impose a federal balanced-budget requirement only very narrowly failed to win Senate approval. New Zealand has its Fiscal Responsibility Act and the United Kingdom has its Code for Fiscal Stability. For the European Union members, the Maastricht Treaty imposes budgetary entrance criteria for participation in European Monetary Union (EMU). In particular, budget deficits should not be higher than the reference level of 3 per cent of GDP and (gross) public debt should not be higher than its reference level of 60 per cent of GDP. When these limits are exceeded, the actual values of the deficit or debt ratio should be close to their reference values and falling at a satisfactory pace. In fact, countries are supposed to adhere to these criteria not only before they enter EMU, but also when they already participate in EMU.

Keywords: Monetary Policy; Fiscal Policy; Euro Area; Public Debt; European Central Bank (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_2

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DOI: 10.1057/9780230629264_2

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