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Reforming the European Stability and Growth Pact: Public Debt is Not the Only Factor, Private Debt Counts as Well

Author

Listed:
  • Gustav A. Horn

    (Macroeconomic Policy Institute (IMK))

  • Torsten Niechoj

    (Macroeconomic Policy Institute (IMK))

  • Silke Tober

    (Macroeconomic Policy Institute (IMK))

  • Till van Treeck

    (Macroeconomic Policy Institute (IMK))

  • Achim Truger

    (Macroeconomic Policy Institute (IMK))

Abstract

Public debt has increased sharply during the financial and economic crisis. The European stability and growth pact could not have prevented this from happening. It follows that the institutional framework of the European Monetary Union is inadequate. Nonetheless, the current debate about reforming the stability and growth pact is dominated by proposals that endorse the one-sided fixation on public deficits and debt and aim to make sanctions more automatic and severe. Such a strategy would not only pose a threat to the current economic recovery in Europe. It also fails to address the problems facing the euro area. Not only public, but also private debt may ptentially destabilize the monetary union. Without a new focus of the pact the problems of the euro area will not be resolved. In this report, the IMK first critically assesses recent reform pro-posals and then presents its own concept of a revised stability and growth pact. Here the focus is on current account balances that may point to unsustainable developments in both the public and the private sector.

Suggested Citation

  • Gustav A. Horn & Torsten Niechoj & Silke Tober & Till van Treeck & Achim Truger, 2010. "Reforming the European Stability and Growth Pact: Public Debt is Not the Only Factor, Private Debt Counts as Well," IMK Report 51e-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:report:51e-2010
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    References listed on IDEAS

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    1. Juergen Stark, 2001. "Genesis of a Pact," Palgrave Macmillan Books, in: Anne Brunila & Marco Buti & Daniele Franco (ed.), The Stability and Growth Pact, chapter 4, pages 77-105, Palgrave Macmillan.
    2. Peter Bofinger & Stefan Ried, 2010. "A new framework for fiscal policy consolidation in Europe," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 45(4), pages 203-211, July.
    3. Till van Treeck & Silke Tober & Achim Truger & Michael Brecht, 2010. "Squaring the circle in Euroland? Some remarks on the Stability and Convergence Programmes 2010-2013," IMK Working Paper 3-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Schwarzer, Daniela & Dullien, Sebastian, 2009. "Die Eurozone braucht einen außenwirtschaftlichen Stabilitätspakt," SWP-Aktuell 27/2009, Stiftung Wissenschaft und Politik (SWP), German Institute for International and Security Affairs.
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    Cited by:

    1. Eckhard Hein & Achim Truger & Till van Treeck, 2011. "The European Financial and Economic Crisis: Alternative Solutions from a (Post-) Keynesian Perspective," IMK Working Paper 9-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Achim Truger & Henner Will, 2013. "The German “debt brake”: a shining example for European fiscal policy?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 153-188.
    3. Georg Feigl & Josef Zuckerstätter, 2012. "Wettbewerbs(des)orientierung," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 117, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    4. Eckhard Hein & Daniel Detzer, 2014. "Coping with imbalances in the Euro area: Policy alternatives addressing divergences and disparities between member countries," Working papers wpaper63, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    5. Georg Feigl & Sepp Zuckerstätter, 2013. "Wettbewerbs(des)orientierung. WWWforEurope Policy Paper Nr. 2," WIFO Studies, WIFO, number 46674, February.
    6. Jan Behringer & Till van Treeck & Achim Truger, 2020. "How to reduce Germany's current account surplus?," Working Papers 8, Forum New Economy.
    7. Gerhard Bosch, 2013. "Public sector adjustments in Germany: From cooperative to competitive federalism," Chapters, in: Daniel Vaughan-Whitehead (ed.), Public Sector Shock, chapter 6, pages 214-258, Edward Elgar Publishing.

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