Enforcement and the Stability and Growth Pact: How Fiscal Policy Did and Did Not Change Under Europe’s Fiscal Framework
IMF Working Papers, May 1, 2006
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- Enforcement and the Stability and Growth Pact: How Fiscal Policy Did and Did Not Change Under Europe’s Fiscal Framework
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Bibliographic details
- Authors: Anthony M Annett
- Published: May 1, 2006
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451863765.001
Summary
- The Stability and Growth Pact has been a success in numerous EU countries, especially in guiding them toward underlying fiscal balance ahead of population aging.
- Success is concentrated in countries that are:
- smaller,
- subject to greater macroeconomic volatility,
- reliant on a form of fiscal governance that emphasizes targets and contracts.
- Most of the new members share these characteristics.
- For the countries less compatible with the Pact, domestic governance reforms that increase the reputational costs for noncompliance can be useful complements to the fiscal framework.
Key findings and analysis
- The Pact contributed to progress toward underlying fiscal balance in many EU countries.
- Compatibility with the Pact is associated with country characteristics:
- smaller country size,
- greater macroeconomic volatility,
- reliance on fiscal governance focused on targets and contracts.
- New EU members largely share the characteristics correlated with success under the Pact.
- Countries less compatible with the Pact require complementary domestic governance reforms to raise reputational costs of noncompliance.
Policy recommendations
- Maintain the Stability and Growth Pact where consistent with national characteristics that favor its success.
- Implement domestic governance reforms in countries less compatible with the Pact to:
- increase reputational costs for noncompliance,
- complement the fiscal framework and improve enforcement outcomes.
- Emphasize fiscal governance arrangements that set clear targets and contractual incentives where appropriate.
Publication and metadata
- Author: Anthony M Annett
- Date: May 1, 2006
- Series: Working Paper No. 2006/116
- Issue: 116
- Volume: 2006
- Pages: 34
- DOI: https://doi.org/10.5089/9781451863765.001
- ISBN: 9781451863765
- ISSN: 1018-5941
- Subjects: Fiscal governance, Fiscal policy, Fiscal rules, Fiscal stance, Output gap
- Keywords: area country, commitment country, SGP counterpart, SGP era, SGP period, SGP rule, WP
Disclaimer
- Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/enforcement-and-the-stability-and-growth-pact-how-fiscal-policy-did-and-did-not-change-under-19108