Hostname: page-component-586b7cd67f-r5fsc Total loading time: 0 Render date: 2024-11-24T23:38:53.707Z Has data issue: false hasContentIssue false
  • English
  • Français

The Pact is Dead: Long Live the Pact

Published online by Cambridge University Press:  26 March 2020

Iain Begg  and
Waltraud Schelkle
Waltraud Schelkle*
Affiliation:
European Institute, London School of Economics and Political Science
*
E-mail addresses: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

The ECOFIN Council decision of November 2003 that noted the existence of ‘excessive deficits’ in France and Germany but did not impose sanctions on these two governments was widely interpreted as sounding the death-knell for the Stability and Growth Pact. A ruling by the European Court of Justice on 13 July 2004 annulled this decision, paving the way for reform of fiscal policy coordination in the Euro Area. This article examines what caused the difficulties that have arisen, reviews and appraises a range of proposals for reform of EMU's fiscal policy rules and suggests a way forward.

Type
Articles
Information
National Institute Economic Review , Volume 189 , July 2004 , pp. 86 - 98
Copyright
Copyright © 2004 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We are grateful to the editors of the Review for constructive suggestions.

References

Allsopp, C. and Artis, M.J. (2003), ‘The assessment: EMU, four years on’, Oxford Review of Economic Policy, 19, pp. 1–29.CrossRefGoogle Scholar
Banca d'Italia (2001), Fiscal Rules, Conference proceedings, Rome: Banca d'Italia (URL: http://www.bancaditalia.it/).Google Scholar
Begg, D., Giavazzi, F., Spaventa, L. and Wyplosz, C. (1991), Monitoring European Integration 2: The Making of Monetary Union, London, Centre for Economic Policy Research.Google Scholar
Begg, I. (2003), ‘Hard and soft economic policy co-ordination under EMU: problems, paradoxes and prospects’, Harvard University Center for European Studies Working Paper no. 103.Google Scholar
Begg, I.Hodson, D. and Maher, I. (2003), ‘Economic policy coordination in the European Union’, National Institute Economic Review, 183, pp. 66–77.CrossRefGoogle Scholar
Bofinger, P. (2003), ‘The stability and growth pact neglects the policy mix between fiscal and monetary policy’, Intereconomics January/February, pp. 4–10.CrossRefGoogle Scholar
Buiter, W.H. (2003), ‘How to reform the Stability and Growth Pact’, Central Banking XIII, pp. 49–58.Google Scholar
Buiter, W., Corsetti, G. and Roubini, N. (1993), ‘Excessive deficits: sense and nonsense in the Treaty of Maastricht’, Economic Policy, 16, pp. 57–90.CrossRefGoogle Scholar
Buiter, W.H. and Graefe, C. (2002), ‘Patching up the Pact - some suggestions for enhancing fiscal sustainability and macroeconomic stability in an enlarged European Union’, CEPR Discussion Paper No. 3496, London, Center for Economic Policy Research.Google Scholar
Buti, M., Eijffinger, S., Franco, D. (2003), ‘Revisiting the Stability and Growth Pact: grand design or internal adjustment?’, European Economy. Economic Papers No.180 - January Brussels, European Commission (URL: http://europa.eu.int/comm/economy_finance).Google Scholar
Buti, M., Martinez-Mongay, C., Sekkat, K. and van den Noord, P. (2002), ‘Automatic stabilizers and market flexibility in EMU: is there a trade-off?’, Economics Department Working Papers No.335, Paris, OECD. (URL: www.oecd.org/eco).Google Scholar
Casella, A. (1999), ‘Tradeable deficit permits. Efficient implementation of the Stability Pact’, Economic Policy, October, pp. 322–361.Google Scholar
CEC (2002a), ‘Communication to the European Parliament and Council: on the needs and means to upgrade the quality of budgetary statistics’, 27/11/2002, COM(2002) 670 final.Google Scholar
CEC (2002b), ‘Communication to the European Parliament and Council: strengthening the co-ordination of budgetary policy’, 27/11/2002, COM(2002) 668 final,Google Scholar
CEC (2003), An agenda for a growing Europe: making the EU economic system deliver, Report of an Independent High-Level Study Group established on the initiative of the President of the European Commission [The ‘Sapir’ Report], Brussels, European Commission.Google Scholar
CEC (2004), ‘Public finances in EMU 2004’ European Economy 3/2004 (forthcoming).Google Scholar
Coeuré, B. and Pisani-Ferry, J. (2003), Autour de l'euro et au delà: l'UEM et les coopérations renforcées, Paris, Commissariat Général du Plan.Google Scholar
Collignon, S. (2001), ‘Economic policy coordination in EMU: political and institutional requirements’, Center for European Studies Working Paper May 2001, Cambridge, MA., Harvard University.Google Scholar
Collignon, S. (2003), The European Republic, London, The Federal Trust.Google Scholar
Cukierman, A. and Meltzer, A.H. (1986), ‘A positive theory of discretionary policy, the cost of democratic government, and the benefits of a constitution’, Economic Inquiry, 24 (July), pp. 367–388.CrossRefGoogle Scholar
de Grauwe, P. (2003), ‘The Stability and Growth Pact in need of reform’, University of Leuven Working Paper.Google Scholar
de Haan, J. and Sturm, J.E. (1997), ‘Political and economic determinants of OECD budget deficits and government expenditures: a reinvestigation’, European Journal of Political Economy 13, pp. 739–750.CrossRefGoogle Scholar
Eichengreen, B. (2003), ‘What to do with the stability pact’ Intereconomics, January/February, pp. 7–10.CrossRefGoogle Scholar
Eijffinger, S.C.W. (2003), ‘How can the Stability and Growth Pact be improved to achieve both stronger discipline and greater flexibility’, Intereconomics, January/February, pp. 10–15.CrossRefGoogle Scholar
Fatás, A. and Mihov, I. (1999), ‘Government size and automatic stabilizers: international and intranational evidence’, CEPR Discussion Paper No. 2259, London, Center for Economic Policy Research.Google Scholar
Fatás, A. and Mihov, I. (2002), ‘The case for restricting fiscal policy discretion’, CEPR Discussion Paper No. 3277, London, Center for Economic Policy Research.Google Scholar
Goodhart, C.A.E. and Smith, S. (1993), ‘Stabilization’, European Economy, 5, pp. 417–455.Google Scholar
Hallerberg, M., Strauch, R. and von Hagen, J. (2001), The Use and Effectiveness of Budgetary Rules and Norms in EU Member States, Report prepared for the Dutch Ministry of Finance by the Institute of European Integration Studies, download via URL: http://www.pitt.edu/%7Ehallerb/research.html.Google Scholar
HM Treasury (2003), ‘Fiscal stabilization and EMU. A discussion paper’, London, HM Treasury (URL: http://www.hm-treasury.gov.uk/documents/the_euro/assessment/studies/euro_assess03_studherefordshire.cfm).Google Scholar
Hodson, D. and Maher, I. (2004), ‘Soft law and sanctions: economic policy coordination and the reform of the Stability and Growth Pact’, Journal of European Public Policy (forthcoming).CrossRefGoogle Scholar
Hughes Hallett, A., Lewis, J. and von Hagen, J. (2004), Fiscal Policy in Europe 1991-2003: An Evidence-based Analysis, London, CEPR.Google Scholar
Issing, O. (2002), ‘On macroeconomic policy co-ordination in EMU’, Journal of Common Market Studies, 40, pp. 345–368.CrossRefGoogle Scholar
Kenen, P.B. (1969), ‘The theory of optimum currency areas: an eclectic view’, in Mundell, R.A. and Swoboda, A.K. (eds), Monetary Problems of the International Economy, Chicago, Chicago University Press, pp. 41–60.Google Scholar
Kopits, G. (2001), ‘Fiscal rules: useful policy framework of unnecessary ornament?’, in Banca d'Italia (2001), pp. 59–84.Google Scholar
Kopits, G. and Symansky, S. (1998), Fiscal Policy Rules, IMF Occasional Paper No.162, Washington DC, IMF.CrossRefGoogle Scholar
Korkman, S. (2001), ‘Fiscal policy coordination in EMU: should it go beyond the SGP?’, in Brunila, A., Buti, M. and Franco, D. (eds) (2001), The Stability and Growth Pact. The Architecture of Fiscal Policy in EMU, Houndmills, Basingstoke, Palgrave, pp. 287–310.CrossRefGoogle Scholar
McKay, D.H. (1999), Federation and European Union: A Political Economy Perspective, Oxford, Oxford University Press.CrossRefGoogle Scholar
Mitchell, J. (2003), ‘Should we be surprised by the unreliability of real-time output gap estimates? Density estimates for the Eurozone’, Discussion Paper 225, London, National Institute of Economic and Social Research.Google Scholar
Orphanides, A. and van Norden, S. (2002), ‘The unreliability of output gap estimates in real time’, Review of Economics and Statistics, 84, pp. 569–583.CrossRefGoogle Scholar
Pisani-Ferry, J. (2002), ‘Fiscal discipline and policy coordination in the Eurozone: assessment and proposals’, note for the GEA meeting of 16 April, Brussels, European Commission.Google Scholar
Schelkle, W. (2002), ‘Disciplining device or insurance arrangement? Two approaches to the political economy of EMU policy coordination’, European Institute Working Papers 1/02, London School of Economics.Google Scholar
Taylor, J.B. (2000), ‘Reassessing discretionary fiscal policy’, Journal of Economic Perspectives, 14 (Summer), pp. 21–36.CrossRefGoogle Scholar
von Hagen, J., Hughes-Hallett, A. and Strauch, R. (2002), ‘Quality and success of budgetary consolidations’, in Buti, M., von Hagen, J. and Martinez-Mongay, C. (eds), The Behaviour of Fiscal Authorities, Basingstoke, Palgrave.Google Scholar
Wren-Lewis, S. (2000), ‘The limits to discretionary fiscal stabilization policy’, Oxford Review of Economic Policy, 16, pp. 92–105.CrossRefGoogle Scholar
Wyplosz, C. (2002), ‘Fiscal policy: rules or institutions?’, Paper prepared for the Group of Economic analysis of the European Commission, April.Google Scholar