Stability and Growth Pact

What is the SGP

The economic rationale(s)

Fiscal rules since the Treaty of Maastricht

Critical views and proposals for reforms

Fiscal Stance in the member countries

Fiscal Rules: an international perspective

What is the SGP back to top

Legal texts from the European Commission:

(a) Article 99 of the EC Treaty - the multilateral surveillance
(b) Article 104 of the EC Treaty - the Excessive Deficit Procedure (EDP)
(c) Protocol on the EDP annexed to the Treaty
(d) Council Regulation 3605/93 on the application of the Protocol on the EDP
(e) European Council Resolution on the Stability and Growth Pact
(f) Council Regulation 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies
(g) Council Regulation 1467/97 on speeding up and clarifying the implementation of the EDP

Statements from the ECB:

Lucas Papademos: Some reflections on the Stability and Growth Pact, speech delivered at the annual dinner of the Institute of Chartered Accountants in Ireland Banking Group, Dublin, 5 April 2004.

Economists' papers:

Buti, M., Eijffinger, S. and D. Franco (2003), Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment?. CEPR DP 3692.

Von Hagen, Juergen (2003), Fiscal Dicipline and Growth in Euroland. Experiences with the Stability and Growth Pact, ZEI WP B06-2003.

Artis, Michael and M. Buti "Close to Balance or in Surplus" - A Policy Maker's Guide to the Implementation of the Stability and Growth Pact, EUI WP 2000/2

Artis M.J. and B. Winkler (1997), "The Stability Pact: safeguarding the credibility of the European Central Bank", EUI Working Papers, RSC No. 97/54

Beetsma R. (2001), "Does EMU need a Stability Pact?", in A. Brunila, M. Buti and D. Franco (eds.), The Stability and Growth Pact: The Architecture of Fiscal Policy in EMU, Macmillan.

Martin Feldstein (April 2005), "The Euro and the Stability Pact", NBER Working Paper No. 11249.

Heipertz, Martin and A. Verdun (2003), "Ruling Europe: Theory and Politics of the Stability and Growth Pact" Research Report, Max Planck Institute for the Study of Societies.

The economic rationale(s) back to top

Sargent, Thomas J., and Neil Wallace (1981): Some Unpleasant Monetarist Arithmetic“ Federal Reserve Bank of Minneapolis Quarterly Review 5: 1-17.

Woodford, Michael (2000): "Fiscal Requirements for Price Stability," Journal of Money, Credit, and Banking, forthcoming.

Chari, V.V and Patick J. Kehoe (2004), On the Desirability of Fiscal Constraints in a Monetary Union, NBER WP 10232

Fiscal rules since the Treaty of Maastricht back to top

• Willem Buiter, Giancarlo Corsetti and Nouriel Roubini (1993), Excessive Deficits: Sense and Nonsense in the Treaty of Maastricht, CEPR DP 750.

• Gali, Jordi and Roberto Perotti (2003), Fiscal Policy and Monetary Integration in Europe NBER WP 9773.

Critical views and proposals for reforms back to top

• Blanchard, Olvier J. and Francesco Giavazzi (2004), Improving the SGP Through a Proper Accounting of Public investment, CEPR Discussion Paper 4220

• Wyplosz, Charles (2002), Fiscal Policy: Institutions vs. Rules, mimeo.

• Buiter, W. and C. Grafe (2002), Patching up the Pact: some Suggestions for Enhancing Fiscal Sustainability and Macroeconomic Stability in an Enlarged European Union, CEPR DP 3496.

• Razin, A. and E. Sadka (2002), The Stability and Growth Pact as an Impediment to Privatizing Social Security, CEPR DP 3621.

• Eichengreen B. and C. Wyplosz (1998), "The Stability Pact: more than a minor nuisance?", Economic Policy, April, 26, 65-113.

• Eichengreen B. (1998), "Saving Europe’s automatic stabilizers", National Institute Economic Review, January.

• Buti, M. and G. Giudice (2003), "Maastricht’s Fiscal rules at Ten" in (eds.) Weiler, J.H., Begg, I. and J. Peterson: Integration in an Expanding European Union Blackwell: Oxford

• Buiter, W. (2003), The Ten Commandments for a Fiscal Rule" Oxford Review of Economic Policy, 19, Spring, Supplement 1, pp. 84-99.

• Buti, M., Eijfinger, S. and D.Franco (2003) "Revisiting EMU’s stability pact: a pragmatic way forward ",Oxford Review of Economic Policy, 19, Spring, Supplement 1, pp. 112-131.

• Fatas, A., Hughes-Hallett, A., Sibert, A., Strauch ,R. and J. von Hagen (2003): Stability and Growth in Europe: Towards a Better Pact , MEI 13, CEPR, London.

• McCauley, Kevin and Malcolm Sawyer (1999), An Alternative Stability Pact for the European Union, Jerome Levy Institute w.p. no. 296.

Current fiscal stance of the member countries back to top

Legal matters:

European Commission: excessive deficit procedure

ECOFIN Council’s decisions: November 2003

Economists' papers:

Recent fiscal policy in selected industrial countries BIS Working Papers No. 162 by David E Lebow Sept 2004

• de Bandt, O. and F. P. Mongelli (2000), Convergence of fiscal policies in the euro area, ECB Working Paper No. 20.

Fiscal Rules: an international perspective top

• Fatas, Antonio and Ilian Mihov (2003), The Macroeconomic Effects of Fiscal Rules in the U.S. States, mimeo.

• Corsetti, Giancarlo and Roubini, Nouriel (1996), European versus American Perspectives on Fiscal Rules, American Economic Review, Papers and Proceedings, May 1996.

Solvency of Public Finances top

• Arghyrou, Michael G. and Kul B Luintel (2003), Government Solvency: Revisiting some EMU Countries, mimeo.

• Artis M.J. and M. Marcellino (2000), "The Solvency of European Government Finances" in (ed. Banca d’Italia), Fiscal Sustainability, Banca d’Italia, Rome.

• OECD (2000), New Issues in public debt management: government surpluses in several OECD countries, The Common currency in Europe and Rapidly rising debt in Japan. pdf

Political Economy top

• Collignon, Stefan (2003), Is Europe Going Far Enough? Reflections on the EU’s Economic Governance, mimeo LSE.

Tax Competition top

• Mendoza, Enrique G. and Linda L. Tesar (2003), Winners and Losers of Tax Competition in the European Union, NBER WP 10051

• Janeba, Eckhard and Guttorm Schjelderup (2002), Why Europe should love Tax Competition - And the U.S. even More so, NBER WP 9334

• Edwards, Jeremy and Michael Keen (1996). Tax competition and Leviathan, European
Economic Review, 40, 113-134.

• Keen, Michael J. and Christos Kotsogiannis (2002). Does federalism lead to excessively high
taxes?, American Economic Review, 92, 363-370.

• Boadway, Robin, M. Marchand and M. Vigneault (1998). The consequences of overlapping tax
bases for redistribution and public spending in a federation, Journal of Public Economics, 68, 453-478.

• Haufler, A. and I. Wooton (1999). Country size and tax competition for foreign direct investment, Journal of Public Economics, 71, 121-139.

• Brueckner, J.K. (2000). A Tiebout/tax-competition model, Journal of Public Economics, 77, 285-306.

• Wilson, J.D. (1999). Theories of tax competition, National Tax Journal, 52, 2, 269-304.

• Besley, Timothy J. and A.C. Case (1995). Incumbent behaviour: vote seeking, tax setting and yardstick competition, American Economic Review, 85 (1), 25-45.

• Besley, Timothy J. and M. Smart (2001). Does tax competition raise voter welfare?, LSE, mimeo.

• Sato, Motohiro (2003). Tax competition, rent-seeking and fiscal decentralization, European Economic Review, 47, 19-40.

• Persson, Torsten and Guido Tabellini (1996). Federal risk constitutions: Risk sharing and moral hazard, Econometrica, 623-646.

• Gordon, Roger H. and James R. Hines Jr. (2002). International taxation, Chapter 28, Volume IV, Handbook of Public Economics.

• Cnossen, Sybren (2002). Tax policy in the European Union: A review of issues and options,
CESifo, Working paper no. 758.

• Genser, B. (2002). Coordinating VATs between EU member states, CESifo Working Paper No.
648(1).

Effects of Fiscal Policy top

Fiscal spillovers in a Monetary Union:

• Mongelli, Francesco (1997), Effects of the European Monetary Union on Taxation and Interest Spending of National Governments, IMF Working Paper, WP/97/93 IMF Working Paper, WP/97/93.

• Fiscal policy and inflation volatility, by Philipp C. Rother, March 2004, (ECB Working Paper No. 317), pdf 738 kB.

Fiscal Federalism and Insurance:

• von Hagen, Jürgen (1998), Fiscal Policy and Intranational Risk-Sharing, ZEI WP B98-13.

• Rodrik, Dani (1998),Why Do More Open Economies Have Bigger Governments? pdf.

• T. Persson, G. Roland and G. Tabellini (1997), "The theory of fiscal federalism: What does it mean for Europe?," in Siebert, H. (ed.), Quo Vadis Europe?, J.C.B. Mohr: Tübingen

Some positive analysis of exogenous policy changes:

• Burnside, Craig, Martin Eichenbaum and Jonas D.M. Fisher (2003), Fiscal Shocks and their Consequences, NBER WP 9772.

• Blachard, Olvier and Roberto Perotti (2002), „An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output,“ Quarterly Journal of Economics, November, 1329-1368, NBER WP 7269.

• Gali, Jordi, J. David Lopez-Salido and Javier Valles (2003), Understanding the Effects of Government Spending on Consumption, mimeo

• Perotti, Roberto (2002), Estimating the effects of fiscal policy in OECD countries, ECB WP 168.

• Canzoneri, Matthew G., Robert E. Cumby and Behzad T. Diba (2002), New Views on the Transatlantic Transmission of Fiscal Policy and Macroeconomic Policy Coordination, mimeo

Analysis of systematic policies:

• Jones, John B. (2002), Has Fiscal Policy Helped Stabilize the Postwar U.S. Economy?“ Journal of Monetary Economics 49, 709-746.

• Chari, V.V., and Patrick J. Kehoe (1999): “Optimal Fiscal and Monetary Policy,” in John B. Taylor and Michael Woodford (eds.), Handbook of Macroeconomics, Amsterdam: Elsevier Science.

• Correia, Isabel, and Pedro Teles (1997): "The Optimal Inflation Tax," Federal Reserve Bank of Minneapolis Discussion Paper 123.

• Schmitt-Grohé, Stephanie, and Martín Uribe „Optimal Simple and Implementable Monetary and Fiscal Rules ” NBER WP10253

• Buti, Marco (ed) (2003), Monetary and Fiscal Policies in EMU :Interactions and Coordination, Cambridge University Press.

• Coutinho, Leonor (2002), Fiscal Policy in the New Open Economy Macroeconomics and Prospects for Fiscal Policy Coordination, mimeo.