How could the Stability and Growth Pact be simplified?
The complexity of the SGP, which may have contributed to its limited effectiveness, reflects largely the conflict between the need to make the original SGP rules more stringent and the desire to allow flexibility with respect to various country circumstances. Now that the effects of the largest economic shock since the 1930s are fading away, a major simplification of the system could be achieved by removing some margins of flexibility, while possibly relaxing some of the SGP long-term parameters. The coexistence of the MTO rule and the expenditure benchmark could also be reconsidered. A more radical solution would involve shifting to a single rule in which an “operational target” would respond to deviations of public debt from its long-term objective.
In-Depth Analysis
External author
Carlo Cotterelli
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Publication type
Keyword
- debt reduction
- economic analysis
- economic geography
- economic governance (EU)
- ECONOMICS
- EU institution
- EU institutions and European civil service
- EU Member State
- euro area
- EUROPEAN UNION
- executive power and public service
- FINANCE
- GEOGRAPHY
- governance
- institutional reform
- macroeconomics
- monetary economics
- monetary relations
- POLITICS
- politics and public safety
- stability pact
- transparency in decision-making