Downloading the Stability Pact in Germany

The primary politico-economic debate on the implementation (downloading) of the Stability Pact has focused on the quantitative analysis of the extent to which national economies have met the numerical convergence criteria for achieving economic stability in EMU. However, much less attention has been directed to the qualitative analysis of whether national economies have adequately made adjustments to safeguard this stability. Given the European and national processes around the formation (uploading) of the Stability Pact, this empirical research proceeds to an evaluation of the impact of the implementation of the Stability Pact in Germany in 1998–2002. In this chapter, a study is made of how and to what extent the German economy has faced and responded to the need for national adjustments under the Stability Pact in EMU. Buti and Sapir have also highlighted the importance of the study of the national implementation of common economic policy objectives. In their opinion, “there is increasing support for the view that budgetary institutions are important determinants of fiscal performance. Even though inadequate institutions per se may not create deficits, they tend to delay the necessary budgetary adjustments following adverse shocks. Measures which change institutional budgetary processes have a direct impact on the rules and practices according to which budgets are drawn up, adopted and implemented.”1