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Close to Balance or in Surplus. A Policy Maker’s Guide to the Implementation of the Stability and Growth Pact

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  • Michael J. Artis
  • Marco Buti

Abstract

Under the Stability and Growth Pact, countries are committed to achieve medium‐term budget positions of ‘close‐to‐balance or in surplus’. The rationale for this commitment is that such budgetary positions would allow for the full working of the built‐in stabilizers without triggering the sanctions procedures of the Pact. This article sets out to show how quantifications of the medium‐term (structural) requirement can accommodate the desired aim and suggests how fiscal measurement and forecasting errors as well as the budgetary effects of ageing may be allowed for. All in all, broadly balanced budgets in the medium term appear to be ‘roughly right’ for most euro‐zone countries. Of course, as the cyclical behaviour of the euro‐zone economy adapts to the new EMU environment, the medium‐term targets will need to be addressed again.
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  • Michael J. Artis & Marco Buti, 2000. "Close to Balance or in Surplus. A Policy Maker’s Guide to the Implementation of the Stability and Growth Pact," EUI-RSCAS Working Papers 28, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    • Handle: RePEc:erp:euirsc:p0026
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    More about this item

    Keywords

    currency; economic integration; EMU; Euro; European Central Bank; political economy; stability pact;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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