International Advances in Economic Research

, Volume 11, Issue 1, pp 29–38 | Cite as

The Hidden Structural Features of the Fiscal Rule: A European Saga

  • Thierry Warin
Original Article

Abstract

This paper addresses the question of the reform of the Stability and Growth Pact (SGP). More and more authors and policymakers are bringing to light the negative impacts of the European deficit rule on the countries and their ability to respond asymmetric economic shocks, and some are asking for a redefinition of the pact. If the focus of the SGP is only fiscal, and two of the biggest countries in Europe have failed to abide by the pact since its implementation, it seems clear that the SGP needs at least a re-examination. Yet, on the contrary, if we introduce into the analytical framework the SGP’s impacts on the European Union’s structural policies, the conclusions are far different. Abolishing the SGP could hinder the presently up-to-date convergence prospective. This paper proposes a theoretical analysis of the SGP that emphasizes a new feature of the SGP: a strong incentive to structural reforms.

JEL

E61 E62 E63 F02 F42 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Alesina, Alberto; Gali, Jordi; Giavazzi, Francesco; Uhlig, Harald; Blanchard, Olivier. “Defining a Macroeconomic Framework for the Euro Area,” Monitoring the European Central Bank, CEPR, 3, 2001.Google Scholar
  2. Amtenbrik, F. J.; De Haan, Jakob; Sleijpen, O. C. H. M. “Stability and Growth Pact: Placebo or Panacea?,” European Business Law Review, 1997, pp. 202–10, 223–38.Google Scholar
  3. Andersen, Torbe M.; Sorensen, Jan-Rose. “Unemployment and Fiscal Policy in an Economic and Monetary Union,” European Journal of Political Economy, 11, 1995, pp. 27–43.Google Scholar
  4. Arestis, Philip; Mccauley, Kevin; Sawyer, M. “The Future of the Euro: Is There an Alternative to the Stability and Growth Pact?,” Public Policy Brief, Levy Institute, 63, 2001.Google Scholar
  5. Beestma, Roel; Uhlig, Harald. “An Analysis of the Stability and Growth Pact,” Economic Journal, 109, 1999, pp. 546–71.Google Scholar
  6. Beetsma, Roel; Bovenberg, A. Lans. “The Interaction of Fiscal and Monetary Policy in a Monetary Union: Balancing Credibility and Flexibility,” Working Papers Tilburg Center for Economic Research, 95101, 1995.Google Scholar
  7. Beetsma, Roel M. W. J.; Bovenberg, A. Lans. “The Optimality of a Monetary Union without a Fiscal Union,” Journal of Money, Credit and Banking, 33, 2, May 2001, pp. 179–204.Google Scholar
  8. Buiter, Willem H.; Corsetti, Giancarlo; Roubini, Nouriel. “Excessive Deficits: Sense and Nonsense in the Treaty of Maastricht,” Economic Policy, 16, 1993, pp. 58–90.Google Scholar
  9. Buti, Marco; Roeger, Werner; Veld, Jan In’t. “Stabilizing Output and Inflation: Policy Conflicts and Co-operation under a Stability Pact,” Journal of Common Market Studies, 39, 5, December 2001, pp. 801–28.Google Scholar
  10. Collignon, Stephan. “Is Europe Going Far Enough? Reflections on the Stability and Growth Pact, the Lisbon Strategy and the EU’s Economic Governance,” European Political Economy Review, 1, 2, Autumn 2003, pp. 222–47.Google Scholar
  11. Collignon, S. “The End of the Stability and Growth Pact?,” International Economics and Economic Policy, 1, 1, March 2004, pp. 15–9.Google Scholar
  12. De Grauwe, Paul. Economics of Monetary Union, Oxford: Oxford University Press, 2003.Google Scholar
  13. De Haan, Jakob; Berger, Helge J.; Jansen David-Jan. “The End of the Stability and Growth Pact?,” CESifo Working Paper, 1093, 2003.Google Scholar
  14. Delors, Jacques. Economic and Monetary Union, Luxembourg: Office of Official Publications of the European Communities, 1989.Google Scholar
  15. Eichengreen, Barry; Wyplosz, Charles. “The Stability Pact: More than a Minor Nuisance,” Economic Policy, 1998, pp. 67–113.Google Scholar
  16. European Commission. “Meeting of Heads of State or Government,” CIG 85/04, June 17 & 18, 2004, pp. 1–30.Google Scholar
  17. Fatas, Antonio; Mihov, Ilian. “On Constraining Fiscal Policy Discretion in EMU,” Oxford Review of Economic Policy, 2003, Forthcoming.Google Scholar
  18. Glick, Reuven; Hutchison, Michael M. “Fiscal Policies in Monetary Unions: Implications for Europe,” Open Economies Review 4, 1993, pp. 39–65.Google Scholar
  19. Godhart, Charles. “EMU in Europe: A UK Perspective,” in Exchange Rate Regimes and Currency Unions, Ernst Baltensperger and Hans Werner (eds.), New York, St Martin’s Press, 1992, pp. 1983–2199.Google Scholar
  20. Gros, Daniel. “A Stability Pact for Public Debt?,” CEPS Policy Brief, 30, January 2003.Google Scholar
  21. Mathieu, Catherine; Sterdyniak, Henri. “Reforming the Stability and Growth Pact: Breaking the Ice,” OFCE, 03, 2003.Google Scholar
  22. Muscatelli, Vito A.; Natale, Piergiovanna; Tirelli, Patrizio. “A Simple and Flexible Alternative to the Stability and Growth Pact Deficit Ceilings. Is it at Hand?,” CESifo Working Paper, 1006, 2003.Google Scholar
  23. Pisani-Ferry, Jean. “Fiscal Discipline and Policy Coordination in the Eurozone: Assessment and Proposals,” European Commission President’s Group of Economic Analysis, Brussels, May, 2002.Google Scholar
  24. Vijselaar, Focco W. “Macroeconomic Policy Co-ordination in the Euro Area,” Netherlands Central Bank MEB Series, 2000-5, June 2000.Google Scholar
  25. Vranceanu, Radu; Warin, Thierry. “EMU: Optimal Fiscal Strategy and the Punishment Effectiveness,” Review of International Economics, 9, 3, 2001, pp. 494–504.Google Scholar

Copyright information

© International Atlantic Economic Society 2005

Authors and Affiliations

  • Thierry Warin
    • 1
  1. 1.Department of Economics, Rohatyn Center for International AffairsMiddlebury CollegeU.S.A

Personalised recommendations