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The Stability and Growth Pact. Lessons from the Great Recession

Larch, Martin ; Van der Noord, Paul and Jonung, Lars LU (2010) In European Economy - Economic Papers
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... (More)
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. (Less)
Please use this url to cite or link to this publication:
author
; and
organization
publishing date
type
Book/Report
publication status
published
subject
in
European Economy - Economic Papers
edition
429
pages
54 pages
publisher
European Union
ISSN
1725-3187
ISBN
978-92-79-14915-3
DOI
10.2765/44911
language
English
LU publication?
yes
id
41ba7692-2a0b-4f31-b71f-9502ee655d44
alternative location
http://ec.europa.eu/economy_finance/publications/economic_paper/2010/pdf/ecp429_en.pdf
date added to LUP
2019-10-18 11:42:35
date last changed
2021-03-22 21:39:02
@techreport{41ba7692-2a0b-4f31-b71f-9502ee655d44,
  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.}},
  author       = {{Larch, Martin and Van der Noord, Paul and Jonung, Lars}},
  institution  = {{European Union}},
  isbn         = {{978-92-79-14915-3}},
  issn         = {{1725-3187}},
  language     = {{eng}},
  series       = {{European Economy - Economic Papers}},
  title        = {{The Stability and Growth Pact. Lessons from the Great Recession}},
  url          = {{https://lup.lub.lu.se/search/files/70976730/ecp429_en.pdf}},
  doi          = {{10.2765/44911}},
  year         = {{2010}},
}