Why has the Stability and Growth Pact Failed?

Jakob de Haan · Helge Berger · David‐Jan Jansen

94 citations0/0 files storedInternational Finance

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European Monetary and Fiscal Policies Global Financial Crisis and Policies Fiscal Policies and Political Economy

Abstract

Abstract This paper evaluates the Stability and Growth Pact. After briefly examining the rules in place and the experience so far, the Pact is analysed from a political economy perspective, focusing on the choice of hard versus soft law and drawing inferences from characteristics of successful fiscal rules at the state level in the USA. The main argument of the paper is that the Pact's enforcement mechanisms are too weak. It is also argued that big countries are less likely to adhere to the fiscal policy rules in place. Reform of the Pact should aim at stricter, instead of more flexible, rules and should not rely on cyclically adjusted deficit estimates.

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References

2000Hard and Soft Law in International Governance 2003Fiscal policy and monetary integration in Europe 2001The Open Method as a New Mode of Governance: The Case of Soft Economic Policy Co‐ordination 1998The Stability Pact: more than a minor nuisance?2003Revisiting the Stability and Growth Pact: Grand Design or Internal Adjustment?2001European Monetary and Fiscal Policy 1998Economic policy in EMU

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