The Stability and Growth Pact: Crisis and Reform

23 Pages Posted: 26 Sep 2011

See all articles by Ludger Schuknecht

Ludger Schuknecht

European Central Bank (ECB)

Philippe Moutot

European Central Bank (ECB)

Philipp Rother

European Central Bank (ECB)

Jürgen Stark

European Central Bank

Date Written: March 21, 2011

Abstract

The sovereign debt crisis in the euro area is a symptom of policy failures and deficiencies in – among other things – fiscal policy coordination. The first nine years of the euro were not used effectively in order to improve public finances, while the Stability and Growth Pact was watered down. Spillovers from the financial and economic crisis compounded fiscal difficulties in the euro area, especially in certain member countries. This paper looks back at the history of fiscal policies and rules in Economic and Monetary Union (EMU). It makes proposals to strengthen fiscal policy governance that go well beyond the legislation set to be adopted in autumn 2011. The authors consider these additional governance measures to be essential for effective policy coordination and sound public finances in the future.

Keywords: fiscal rules, Stability and Growth Pact, fiscal deficits, public debt, EU institutional reform

JEL Classification: H6, E6

Suggested Citation

Schuknecht, Ludger and Moutot, Philippe and Rother, Philipp and Stark, Jürgen, The Stability and Growth Pact: Crisis and Reform (March 21, 2011). ECB Occasional Paper No. 129. Available at SSRN: https://ssrn.com/abstract=1791598

Ludger Schuknecht (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 6494 (Phone)
+49 69 1344 7809 (Fax)

Philippe Moutot

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Philipp Rother

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 0 (Phone)
+49 16 1344 6398 (Fax)

Jürgen Stark

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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