Design and Implementation of the Stability and Growth Pact: The Perspective of New Member States
20 Pages Posted: 2 Aug 2009 Last revised: 18 Sep 2009
Date Written: 2005
Abstract
Current developments in the design and management of fiscal rules in the European Union may have negative implications for New Member States. Loosening of the Stability and Growth Pact (SGP) and a growing degree of arbitrariness in its implementation reduce incentives for fiscal adjustment in New Member States, adjustment that would be crucial during the transition to the Eurozone. High budget deficits may prove a serious obstacle in the process of catching up of New Member States to the income levels of EU-15 countries.
Keywords: fiscal rules, Stability and Growth Pact, Economic and Monetary Union
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