The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Stability and Growth Pact of the European Union

  • Martin Larch
  • Lars Jonung
Reference work entry


While fiscal policy making in the EU is in the hands of national governments, it is to be carried out in accordance with commonly agreed rules: the Stability and Growth Pact (SGP). The SGP originates in the understanding that uncoordinated fiscal policy produces cross-border effects that can harm the functioning of the Economic and Monetary Union. For member states with an excessive deficit, that is, a general government deficit of more than 3% of GDP, the SGP rules are more invasive. Since its inception in 1997, the SGP has undergone a series of amendments aimed at improving fiscal governance in the EU.


Automatic stabilisers Discretionary fiscal policy Excessive deficit procedure Fiscal policy making 

JEL Classification

E6 H3 H6 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Martin Larch
    • 1
  • Lars Jonung
    • 1
  1. 1.