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The Political Stability and Growth Pact is Dead: Long Live the Economic Stability and Growth Pact

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  • PATRICK LEBLOND

Abstract

Euro area countries suspended the excessive deficit procedure (EDP) of the Stability and Growth Pact in November 2003. Surprisingly perhaps, long-term European government bond-holders did not react: yields barely moved. Owing to its political nature, the EDP does not matter for investors. What matters is the implicit economic pact that investors have made with Member State governments. Copyright 2006 Blackwell Publishing Ltd.

Suggested Citation

  • Patrick Leblond, 2006. "The Political Stability and Growth Pact is Dead: Long Live the Economic Stability and Growth Pact," Journal of Common Market Studies, Wiley Blackwell, vol. 44, pages 969-990, December.
    • Handle: RePEc:bla:jcmkts:v:44:y:2006:i::p:969-990
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    1. Buti, M. & Eijffinger, S.C.W. & Franco, D., 2003. "Revisiting the stability and growth pact : Grand design or internal adjustment?," Other publications TiSEM 043c3668-8744-491c-a329-3, Tilburg University, School of Economics and Management.
    2. Antonio Fuster Olivares & Jose Miguel Giner Perez & Mª Carmen Tolosa Bailen, 2004. "The new economy in Spain: a regional analysis," ERSA conference papers ersa04p284, European Regional Science Association.
    3. Marco Buti & Paul van den Noord, 2003. "Discretionary Fiscal Policy and Elections: The Experience of the Early Years of EMU," OECD Economics Department Working Papers 351, OECD Publishing.
    4. Denise Côté & Christopher Graham, 2004. "Convergence of Government Bond Yields in the Euro Zone: The Role of Policy Harmonization," Staff Working Papers 04-23, Bank of Canada.
    5. Buti, Marco, 2003. "Revisiting the stability and growth pact: grand design or internal adjustment?," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34908, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    Cited by:

    1. Patrick Leblond, 2011. "The Global Financial Crisis and the European Integration Project," CIRANO Working Papers 2011s-55, CIRANO.
    2. Davide VITTORI, 2013. "A political crisis in an economic tempest (January 2008 – December 2012)," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 4, pages 105-126, June.
    3. Ngai, Victor, 2012. "Stability and Growth Pact and Fiscal Discipline in the Eurozone," Working Papers 12-10, University of Pennsylvania, Wharton School, Weiss Center.

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