Delivering the Eurozone ‘Consistent Trinity’

Marco Buti, Maria Demertzis, João Nogueira Martins 30 March 2014

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As argued in an earlier commentary, the financial crisis exposed important economic inconsistencies in the way that EMU operated.1 Although progress has been made, the reality is that more needs to be done. A number of countries still need to consolidate their public finances further, and also implement structural reforms to promote growth and sustain satisfactory welfare systems. At the same time, there is a need for vulnerable countries to ensure consistency between regaining competitiveness and the sustainability of private and public debts.

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Topics:  Europe's nations and regions Macroeconomic policy

Tags:  eurozone, euro, EMU, imbalances, fiscal policy, structural reforms, fiscal consolidation, debt, Eurozone crisis, Stability and Growth Pact, banking union, internal devaluation

Europe’s new fiscal compact treaty does not outlaw Keynesianism and is a stepping stone to more progress

Jacob Funk Kirkegaard 06 February 2012

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In record time since the idea was first mulled over at the EU Council on 9 December 2011, Europe has compiled a new Fiscal Compact Treaty.1 Angela Merkel on the night of its final approval on 30 January called it a “masterpiece”. It is perhaps unsurprising, though, that not everyone agrees.

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Topics:  EU policies

Tags:  Germany, Keynesianism, Eurozone crisis, Stability and Growth Pact, Fiscal Compact Treaty

A crisis mechanism for the euro

Giancarlo Corsetti, John Hassler, Gilles Saint-Paul, Hans-Werner Sinn, Jan-Egbert Sturm, Xavier Vives, Michael P. Devereux 11 March 2011

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When the fathers of the euro devised the common currency, they endowed it with a set of rules to buttress its credentials as a new global hard currency. According to the so-called Stability and Growth Pact, no member country was henceforth allowed to have budget deficits exceeding 3% of GDP, nor have public debt above 60% of GDP. In addition, a no-bailout clause was introduced to instil further discipline (Official Journal of the European Union 1997). With safeguards like that, what could possibly go wrong?

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Topics:  EU policies Europe's nations and regions

Tags:  Fiscal crisis, Eurozone crisis, Stability and Growth Pact

Saving jobs or saving institutions?

Tito Boeri 16 December 2010

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 The package on economic governance to be discussed by the European Council on 16 December acknowledges the dangers associated with external imbalances as well as fiscal imbalances. It also provides rules for public debt (rather than simply deficit) reduction. Both innovations mark a significant improvement with respect to the defunct fiscal rules for the Eurozone.

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Topics:  EU policies Europe's nations and regions

Tags:  European Council, Eurozone crisis, Stability and Growth Pact

Fixing the flaws in the Eurozone

Stanley W Black 23 November 2010

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What is happening to the Eurozone? Are the troubles of the high-inflation countries (Greece, Ireland, Portugal, and Spain) due to excessive government borrowing that should have been reined in by the Stability and Growth Pact? Is the solution to be found in more stringent enforcement of the excessive deficit procedures?

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Topics:  EU policies Europe's nations and regions

Tags:  Ireland, Eurozone crisis, Stability and Growth Pact

Stronger EU economic governance: A response to the critics

Marco Buti, Martin Larch 25 October 2010

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Severe crises trigger reforms, and reforms trigger controversy. The ongoing reform of EU economic governance is no different. It comes as an inevitable and necessary consequence of the worst financial and economic dislocations Europe has witnessed in decades. The legitimate and most pertinent question is: Has the Commission found the right answers?

A number of prominent observers who recently posted their views on this site seem to have serious doubts. They either believe the Commission's proposals aim at the right targets but use the wrong tools or aim at the wrong targets.

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Topics:  EU policies Europe's nations and regions

Tags:  Eurozone crisis, Stability and Growth Pact, European governance

The European Commission’s proposals: Empty and useless

Francesco Giavazzi, Luigi Spaventa 14 October 2010

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Debts and deficits have always occupied centre stage of the European economic policy debate – the implicit assumption being that fiscal discipline is the relevant condition for the stability of the Union.

But the Greek budget mess was only the proximate cause of the recent crisis. Its main roots were not fiscal in nature. After all, Ireland and Spain – with their low deficits (surpluses in some years) and debt levels (well below 60%) – have had trouble despite having been paragons of fiscal virtue. Their vices, being of a different kind, went unnoticed.

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Topics:  EU policies Europe's nations and regions

Tags:  European Commission, Eurozone crisis, Stability and Growth Pact

The Commission proposals for stronger EU economic governance: A comprehensive response to the lessons of the Great Recession

Marco Buti, Martin Larch 14 October 2010

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On 29 September, the European Commission adopted a comprehensive set of proposals to reform and to broaden EU economic governance. The reform package is the most recent step in a much broader effort to incorporate the lessons of the crisis in the EU policy framework, to prevent economic instabilities and, ultimately, to protect workers and taxpayers.

Yet while recent comments have focused on individual sections of the package, in this column we provide an overview of all elements and clarify the thinking behind them.

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Topics:  EU institutions EU policies

Tags:  EU, European Commission, Eurozone crisis, Stability and Growth Pact

Stability and Growth Pact: Counterproductive proposals

Paolo Manasse 07 October 2010

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The global crisis has laid bare the inadequacy of the European surveillance procedures. Enshrined in the Stability and Growth Pact, the idea was to prevent fiscal ill-discipline, the explosion of domestic and foreign debt, trade imbalances, as well as competitiveness gaps in the Eurozone. It didn’t work. On 29 July the European Commission adopted an ambitious reform of the pact. The reform does present some positive innovations, but many new features appear unrealistic or even harmful.

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Topics:  EU institutions

Tags:  European Commission, Eurozone crisis, Stability and Growth Pact

Why a tougher Stability and Growth Pact is a bad idea

Paul De Grauwe 04 October 2010

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The European Commission has presented its proposals to strengthen the Stability and Growth Pact (SGP). If accepted by the Council, this will be the third version since the start of the Eurozone.

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Topics:  EU institutions

Tags:  Stability and Growth Pact, Economic governance

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