The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Stability and Growth Pact

  • Thierry Warin
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_2165

Abstract

The Stability and Growth Pact was designed in 1997 and implemented with the inception of the euro in 1999. An innovative tool in essence, it provides, first, a practical definition of the concept of fiscal sustainability by imposing a ceiling of three per cent and 60 per cent respectively on the budget deficit and public debt. Second, it offers guidelines for governments’ public finances. Third, it offers a way to coordinate national public finances to achieve an optimal fiscal–monetary policy mix within the Eurozone. Even before some countries breached the Pact, the economic literature argued about its rationales.

Keywords

Bonds Budget deficits Business cycles Default risk premia Economic and Monetary Union (EMU) European Central Bank Eurozone Fiscal rules vs. discretion Fiscal–monetary policy mix Free-rider problem Medium Term budgetary Objective (EU) Monetization Moral hazard Optimal fiscal policy Political budget cycles Public debt Public finance Stability and Growth Pact Stabilization Treaty of Amsterdam (EU) Treaty of Maastricht (EU) Uncovered interest parity 

JEL Classifications

H3 H5 H6 E6 F15 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Thierry Warin
    • 1
  1. 1.