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Fiscal Policy Coordination in EMU: Should it Go Beyond the SGP?

In: The Stability and Growth Pact

Author

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  • Sixten Korkman

Abstract

The fiscal policy requirements of EMU have attracted much attention in the Community.1 Since the mid-1990s the discussion has focused almost exclusively on budget discipline in the context of the Stability and Growth Pact (SGP). The SGP stipulates rules which, if adhered to by member states, ensure that ‘excessive’ general government financial deficits are avoided. This should be helpful for the macro- economic policy mix by containing upward pressure on interest rates, while at the same time creating room for the automatic fiscal stabilisers to operate. The SGP may also improve the functioning of the economy in more indirect ways: sound public finances, in combination with price stability, should reduce uncertainty of expectations, enhance confidence of market participants, and strengthen incentives for social partners and governments to tackle structural problems hampering the functioning of markets.

Suggested Citation

  • Sixten Korkman, 2001. "Fiscal Policy Coordination in EMU: Should it Go Beyond the SGP?," Palgrave Macmillan Books, in: Anne Brunila & Marco Buti & Daniele Franco (ed.), The Stability and Growth Pact, chapter 12, pages 287-310, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-62926-4_12
    DOI: 10.1057/9780230629264_12
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    Cited by:

    1. Marco Buti & Sylvester Eijffinger & Daniele Franco, 2003. "Revisiting the Stability and Growth Pact: grand design or internal adjustment?," European Economy - Economic Papers 2008 - 2015 180, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Amy K. Filipek & Till Schreiber, 2010. "The Stability and Growth Pact: Past Performance and Future Reforms," Working Papers 97, Department of Economics, College of William and Mary.
    3. Heipertz, Martin, 2003. "The Stability and Growth Pact - Not the best but better than nothing. Reviewing the debate on fiscal policy in Europe's Monetary Union," MPIfG Working Paper 03/10, Max Planck Institute for the Study of Societies.

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