Since its inception in 1997, the Stability and Growth Pact (SGP) has lived through times both good and bad. It has been berated by politicians, academics, trade unionists and many other participants in the public debate. It has been called simultaneously too rigid and too lax, harmful to economic growth and outright ‘stupid’. At the same time, the constituency has grown in number of those who strongly believe in the merits of a rules-based framework to rein in the fiscal appetite of the executive branches and to bring the issue of the sustainability of public finances to the fore of the political debate. Today, the SGP is the cornerstone of European economic policy coordination and surveillance framework for nationally determined fiscal policies in the single currency area. It is as intimately linked with Economic and Monetary Union as is the European Central Bank or the euro itself. Yet every crisis, be it political or economic, puts to the test the effectiveness, the credibility and the political sustainability of the Pact.

In order to withstand the test of time, it has been important to recall repeatedly and to emphasise the economic and political ‘doctrine’ underlying the SGP, while avoiding dogmatically enforcing its rules without due regard for the specific economic and political circumstances.

In 2004, a combination of economic, political and legal constraints implied that a revision of the fiscal surveillance framework had become unavoidable in order to stop the de facto demise of the Pact.