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The Stability pact Pains : A Forward-Looking Assessment of the Reform Debate

Author

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  • Buti, M.
  • Eijffinger, S.C.W.

    (Tilburg University, Center For Economic Research)

  • Franco, D.

Abstract

The Stability and Growth Pact has been under fire ever since it was born. But is the Pact a flawed fiscal rule? Against established criteria for an ideal fiscal rule, its design and compliance mechanisms show strengths and weaknesses. The latter tend to reflect trade-offs typical of supra-national arrangements. In the end, only a higher degree of fiscal integration would remove the inflexibility inherent in the recourse to predefined budgetary rules. No alternative solution put forward in the literature appears clearly superior. This does not mean that the original Pact of 1997 could not be improved. The debate on the SGP has shown that any reform should aim at overcoming the excessive uniformity of the rules, improving their transparency, correcting pro-cyclicality and strengthening enforcement. The reform of the Pact agreed in 2005 moves in this direction but leaves open a number of issues.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Buti, M. & Eijffinger, S.C.W. & Franco, D., 2005. "The Stability pact Pains : A Forward-Looking Assessment of the Reform Debate," Discussion Paper 2005-101, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:d74263d9-e665-4a64-81cd-74e89ab474f1
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    as
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    More about this item

    Keywords

    EMS; fiscal policy; fiscal rules; Economic and Monetary Union; Stability and Growth 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
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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