Fiscal Policy in Emu: Towards a Sustainability and Growth Pact?

Posted: 29 Feb 2008

See all articles by Benoit Coeure

Benoit Coeure

Ecole Polytechnique, Paris

Jean Pisani-Ferry

Hertie School of Governance; French Prime Minister’s office

Abstract

This paper takes stock of the academic and policy discussions on the fiscal institutions of EMU, confronts the framework in place with what is known of the desirable properties of fiscal policy in a monetary union, and discusses possible improvements. We start with a discussion of three requirements for the fiscal framework of a monetary union: it should be conducive to public finance sustainability, leave room for stabilization at the national level, and encourage structural reform. We then examine how the Stability and Growth Pact (SGP) measures up to these requirements and find that it has mostly failed on all three accounts. Whether the 2005 reform of the SGP fixes those deficiencies remains an open issue. To this end, we propose five building blocks towards an effective SGP: a better concept of sustainability; harmonized general government balance sheets; appropriate targets; refined procedures; and better institutions.

Suggested Citation

Coeure, Benoit and Pisani-Ferry, Jean, Fiscal Policy in Emu: Towards a Sustainability and Growth Pact?. Oxford Review of Economic Policy, Vol. 21, Issue 4, pp. 598-617, 2005, Available at SSRN: https://ssrn.com/abstract=906420

Benoit Coeure

Ecole Polytechnique, Paris ( email )

1 rue Descartes
Paris, 75005
France

Jean Pisani-Ferry

Hertie School of Governance ( email )

Schlossplatz 1
Berlin, 10178
Germany

French Prime Minister’s office ( email )

Paris
France

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