Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259997 
Year of Publication: 
2011
Series/Report no.: 
Working Paper No. 2011:6
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
While current instruments of EU economic policy coordination helped stave off a full-scale depression, the post-2007 global financial and economic crisis has revealed a number of weaknesses in the Stability and Growth Pact, the EU framework for fiscal surveillance and fiscal policy coordination. This paper provides a diagnosis of how the SGP faired ahead and during the present crisis and offers a first comprehensive review of the ongoing academic and policy debate, including an account of the reform proposals adopted by the Commission on 29 September 2010. In our view, the current system of EU rules is unbalanced. It consists of (i) very specific provisions on how to conduct fiscal policy making in normal times with no effective enforcement mechanisms, and of (ii) no or extremely tight provisions for really bad economic times, like the Great Recession. A two-pronged approach as outlined in this report is needed to revive the Pact: tighter enforcement, coupled with broader macroeconomic surveillance, in good times and an open window for exceptionally bad times, including a crisis resolution mechanism at the EU level.
Subjects: 
Stability and Growth Pact
EU
Europe
the euro
Great Recession
fiscal sovereignty
JEL: 
E62
E63
H60
Document Type: 
Working Paper

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