The stability and growth pact neglects the policy mix between fiscal and monetary policy

Intereconomics

Volumn 38, Issue 1, 2003, Pages 4-7

  Bofinger, Peter ^a,b  

^a UNIVERSITY OF WÜRZBURG   (Germany)

^b CEPR   (United Kingdom)

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Indexed keywords

EID: 32644485223     PISSN: 00205346     EISSN: 1613964X     Source Type: Journal    
DOI: 10.1007/BF03031831     Document Type: Article

References (4)

1. E.g. in its October Bulletin (p.6) the ECB calls for "decisive action in order to set up credible adjustment paths" and it maintains ".adjustment paths must entail significant yearly improvements in the cyclically adjusted balance, to be followed strictly and completed within the shortest possible time frame."
2. Resolution of the European Council on the Stability and Growth Pact, Amsterdam European Council, 16 and 17 June 1997.
3. It is important to note that the widening was not caused by a "traditional" inflation country like Italy but by the high growth countries like Ireland which had rather low inflation rates before EMU entry.
4. The editorial in the ECB's October Bulletin shows that the ECB is currently not fully aware of the risk with which some countries, especially Germany, are confronted. On page 6, the problem of a procyclical policy stance is downplayed as follows: "Credible fiscal consolidation is supportive to the outlook for economic growth. Direct effects on demand in the short term should be counteracted by higher credibility of the conduct of fiscal policy, boosting confidence and thus private spending."