THE STABILITY AND GROWTH PACT: CRISIS AND REFORM

The sovereign debt crisis in the euro area is a symptom of policy failures and deficiencies in fiscal policy coordination. It reflects the as yet unresolved challenge of how to place public finances on a sufficiently sound fooling in the European Monetary Union (EMU). This challenge has been compoun...

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Bibliographic Details
Published inIfo DICE report Vol. 9; no. 3; p. 10
Main Authors Schuknecht, Ludger, Moutot, Philippe, Rother, Philipp, Stark, Jürgen
Format Journal Article
LanguageEnglish
Published Munich Ifo Institute 01.10.2011
Subjects
Budget deficits
Coordination
Economic development
European Monetary Union
Eurozone
Expenditures
Fiscal policy
GDP
Gross Domestic Product
Public finance
Reforms
Sovereign debt
Studies
Surveillance
Europe
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Summary:The sovereign debt crisis in the euro area is a symptom of policy failures and deficiencies in fiscal policy coordination. It reflects the as yet unresolved challenge of how to place public finances on a sufficiently sound fooling in the European Monetary Union (EMU). This challenge has been compounded by spillovers from the financial and economic crisis to public finances. The greatly increased fiscal imbalances in the euro area as a whole and the dire situation in individual member countries risk undermining stability, growth and employment, as well as the sustainability of EMU itself. This paper looks at the history of fiscal policy and rules in EMU before concluding with proposals in the area of fiscal governance that the authors consider essential for effective policy coordination in the future. Many observers and economists warned against establishing EMU without adequate fiscal controls.
ISSN:2511-7815
2511-7823