The "new" stability and growth pact: More flexible, less stupid?

Intereconomics

Volumn 42, Issue 4, 2007, Pages 218-225

  Alves, Rui Henrique ^a   Afonso, Oscar ^a  

^a UNIVERSITY OF PORTO   (Portugal)

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[No Author keywords available]

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EID: 36348970090     PISSN: 00205346     EISSN: 1613964X     Source Type: Journal    
DOI: 10.1007/s10272-007-0222-y     Document Type: Article

References (44)

1. European Council: Resolution on the Stability and Growth Pact. Official Journal of the European Communities, C 236/1, 1997.
2. European Council: Presidency Conclusions, European Council Brussels. Concl 1, 7619/1/05, 2005. Available at http://ue.eu.int/ueDocs/cms_Data/ docs/pressData/en/ec/84335.pdf.
3. G. Kopits, S. Symansky: Fiscal policy rules, Occasional Paper 162, Washington 1998, International Monetary Fund.
4. If the real growth of GDP was between -0.75% and -2%, the Council would decide on whether the 3% rule was to be imposed.
5. P. De Grauwe: The Economics of Monetary Integration, 6th edition, Oxford 2005, Oxford University Press.
6. W. Buiter, G. Corsetti, N. Roubini: Excessive Deficits: Sense and Nonsense inAthe Treaty of Maastricht, in: Economic Policy: a European Forum, April 1993, pp. 58-100
7. O. Rubio, D. Figueras: Federalismo y Unión Monetaria en Europa (Federalism and Monetary Union in Europe), Instituto de Estudios Fiscales, P.T. No. 10/98, 1998.
8. R. Solow: Is Fiscal Policy Possible?, in: R. Solow (ed.): Structural Reform and Macroeconomic Policy, 2004, Palgrave Macmillan.
9. Note that this political decision went against the Commissions proposals [European Council: '2546th Council Meeting Economic and Financial Affairs (Press Release), 14492/1/03 REV 1 (en), Brussels 2003, available at: Http://www.consilium.europa.eu/ueDocs/cms_ Data/docs/pressData/en/ ecofin/78051.pdf].
10. Later on, the European Court of Justice would annul the Councils decisions on those countries [Official Journal of the European Union: Order of the Court (2004/C 228/33), 11 September 2004, pp. 16-17].
11. M. Buti, S. Eijffinger, D. Franco: Revisiting EMU's Stability Pact: A Pragmatic Way Forward, in: Oxford Review of Economic Policy, Vol. 19, No. 1, 2003, pp. 100-111
12. J. Creel: Ranking FiscaT Policy Rules: the Golden Rule of Public Finance versus the Stability and Growth Pact. Documents de Travail de l'OFCE 2003-04, Observatoire Français des Conjonctures Économiques, July 2003.
13. J. Creel, op. cit., p. 6.
14. M. Buti, S. Eijffinger, D. Franco, op. cit.
15. "The obvious risk is that of ending up in a vacuum in which the old rules are called into question while the agreement on a new set of rules fails to materialise. Venturing the EMU without fiscal rules would be a leap in the dark. At the same time, given the current level of political integration, the conditions for a federal system of public finances do not seem to exist." Ibid., p. 28.
16. A. Casella: Tradable Deficit Permits: Efficient Implementation of the Stability Pact in the European Monetary Union, in: Economic Policy, Vol. 29, 1999, pp. 323-361.
17. P. Mills, A. Quinet: The Case for Spending Rules, in: Fiscal Rules, Banca d'Italia, 2001, pp. 319-330
18. A. Brunila: Fiscal Policy: Coordination, Discipline and Stabilization, Discussion Paper No 7-2002, Helsinki, Bank of Finland
19. J. von Hagen: More Growth for Stability - Reflections on Fiscal Policy, ZEI Policy Paper, June 2002
20. J. P. Fitoussi, J. Creel: How to Reform the European Central Bank, Centre for European Reform, 2002
21. J. Creel, op. cit.
22. Similar, in fact, to the criticisms of the Maastricht rules that Buiter et al. (op. cit.) had already formulated in 1993.
23. W. Buiter, C. Grafe: Patching up the Pact: Some Suggestions for Enhancing Fiscal Sustainability and Macroeconomic Stability in an Enlarged European Union, in: Economics of Transition, Vol. 12, No. 1, 2004, pp. 67-102.
24. J. Pisani-Ferry: Reforming the SGP: Does it matter? What should be done? in: R. Liddle and M.J. Rodrigues (eds.): Economic Reform in Europe - Priorities for the next five years, Policy Network, 2004.
25. S. Wren-Lewis: Changing the Rules, in: New Economy, Vol. 10, 2003, pp. 73-78
26. J. von Hagen, op. cit.
27. C. Wyplosz: Fiscal Policy: Institutions versus Rules, in: National Institute Economic Review, Vol. 191, 2005, pp. 70-84.
28. A good description of them can be found in M. Buti, S. Eijfinger, D. Franco: The Stability Pact Pains: A Forward-Looking Assessment of the Reform Debate, CEPR Discussion Paper No. 5216, 2005.
29. R. H. Alves: European Union and (Fiscal) Federalism, in: John Mc-Combie, Carlos Rodriguez (eds.): The European Union, 2007, Palgrave Macmillan, forthcoming.
30. For example, W. Buiter: The 'Sense and Nonsense of Maastricht' Revisited: What Have We Learnt About Stabilization In EMU? CEPR Discussion Paper No. 5405, 2005
31. B. Coeuré, J. Pisani-Ferry: A Sustainability Pact for the Eurozone, in: L. Tsoukalis (ed.): Governance and Legitimacy in EMU, European University Institute, 2005.
32. Note, for instance, that recently Afonso and Alves suggested that temporarily excessive deficits should be allowed for the small and less developed countries within the euro area, in order to let the government subsidise R&D activities and, thus, reduce the level of development gap. O. Afonso, R.H. Alves: To Deficit or Not to Deficit: Should the European Fiscal Rules Differ Among Countries?, FEP Working Papers, No. 219, July 2006.
33. There is a great deal of literature on this subject, starting with the seminal works of Niehans, Cooper and Hamada. Cf. J. Niehans: Monetary and Fiscal Policies in Open Economies Under Fixed Exchange Rates: An Optimizing Approach, in: Journal of Political Economy, Vol. 76, 1968
34. R. Cooper: The Economics of Interdependence, New York 1968, McGraw-Hill
35. K. Hamada: A Strategic Analysis of Monetary Interdependence, in: Journal of Political Economy, 1976.
36. Among others, see the arguments developed by Frankel and Rockett, Miller and Salmon, Maillet and Tabellini. Cf. J. Frankel, K. Rockett: International Macroeconomic Policy Coordination When Policymakers Do Not Agree on the True Model, in: American Economic Review, Vol. 78, 1988, pp. 318-340
37. M. Miller, M. Salmon: Policy Coordination and Dynamic Games, in: W. Buiter and R. Marston (eds.): International Economic Coordination, 1985, Cambridge University Press
38. P. Maillet: La Politique Économique Dans lEurope d'Après 1993, Paris 1992, Presses Universitaires de France
39. G. Tabellini: Domestic Politics and the International Coordination of Fiscal Policies, in: Journal of International Economics, Vol. 28, 1990.
40. Taking the case of the European Union as a base, it is worth consulting Beetsma and Bovenberg, Uhlig, or Muscatelli et al. Cf. R. Beetsma, A. Bovenberg: Designing Fiscal and Monetary Institutions for a European Monetary Union, in: Public Choice, Vol. 102, Nos. 3-4, 2001, pp. 247-269
41. H. Uhlig: One Money, but Many Fiscal Policies in Europe: What Are the Consequences?, CEPR Discussion Papers, No. 3296, April 2002
42. V. Muscatelli, P. Tirelli, C. Trecroci: Fiscal and monetary policy interactions: Empirical evidence and optimal policy using a structural New-Keynesian model, in: Journal of Macroeconomics, Vol. 26, No. 2, 2004, pp. 257-280.
43. A. Italianer, M. Vanheukelen: Proposals for Community Stabilisation Mechanisms: Some Historical Applications, in: European Economy, special edition on 'The Economics of Community Public Finance, 1992
44. A. Italianer, J. Pisani-Ferry: The regional-stabilisation properties of fiscal arrangements, in: J. Mortensen (ed.): Improving economic and social cohesion in the European Community, New York 1994, St. Martins Press, pp. 155-194.