[Article] The European Stability and Growth Pact

Research Article_s Finance Economics

Presentation of the Stability and Growth Pact (SGP) : the European Union’s (EU) answer to concerns about fiscal unsustainability.

Thierry Warin https://www.warin.ca (HEC Montréal and CIRANO (Canada))https://www.hec.ca/en/profs/thierry.warin.html


The Stability and Growth Pact was designed in 1997 and implemented with the inception of the euro in 1999. An innovative tool in essence, it provides, first, a practical definition of the concept of fiscal sustainability by imposing a ceiling of three per cent and 60 per cent respectively on the budget deficit and public debt. Second, it offers guidelines for governments’ public finances. Third, it offers a way to coordinate national public finances to achieve an optimal fiscal–monetary policy mix within the Eurozone. Even before some countries breached the Pact, the economic literature argued about its rationales.

Keywords: Bonds; Budget deficits; Business cycles; Default risk premia; Economic and Monetary Union (EMU); European Central Bank; Eurozone; Fiscal rules vs. discretion; Fiscal–monetary policy mix; Free-rider problem; Medium Term budgetary Objective (EU); Monetization; Moral hazard; Optimal fiscal policy; Political budget cycles; Public debt; Public finance; Stability and Growth Pact; Stabilization; Treaty of Amsterdam (EU); Treaty of Maastricht (EU); Uncovered interest parity



For attribution, please cite this work as

Warin, "Thierry Warin, PhD: [Article] The European Stability and Growth Pact",  The New Palgrave Dictionary of Economics, 2008

BibTeX citation

  author = {Warin, Thierry},
  title = {Thierry Warin, PhD: [Article] The European Stability and Growth Pact},
  journal = { The New Palgrave Dictionary of Economics},
  year = {2008},
  note = {https://warin.ca/posts/article-the-european-stability/},
  doi = {10.1057/978-1-349-95121-5_2165-1}