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Open Issues On the Implementation of the Stability and Growth Pact

Published online by Cambridge University Press:  26 March 2020

Marco Buti  and
Bertrand Martinot
Bertrand Martinot
Affiliation:
Economic and Financial Affairs, European Commission
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Abstract

Now that the budget deficits in the Euro Area are approaching balance, the Stability and Growth Pact (SGP) looks like a largely non-constraining institutional framework with little impact on national fiscal policies. This article challenges this view and argues that the implementation of the SGP ‘at cruising speed’ is faced with a number of outstanding issues: safeguarding the automatic stabilisers under the SGP; coping with the consequences of the asymmetric nature of the SGP for the co-ordination of macroeconomic policies; and ensuring the long-run sustainability of public finances. It concludes that enlarging the scope and enhancing the credibility of the stability and convergence programmes to become a true instrument of fiscal policy coordination in the Euro Area would be a first step in lifting the uncertainties surrounding the implementation of the SGP.

Type
Research Article
Information
National Institute Economic Review , Volume 174 , October 2000 , pp. 92 - 104
Copyright
Copyright © 2000 National Institute of Economic and Social Research

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Footnotes

The authors would like to thank Andr6 Sapir for useful discussions. The opinions expressed in this article belong to the authors and should not be attributed to the European Commission or its services.

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