The implementation of the Stability and Growth Pact: Taking stock of the first four years

Article abstract:

Portugal, Germany and France have significantly exceeded the 3 per cent ceiling for government deficits, a central requirement of the European Stability Pact. Italy has come very close to doing so. All four countries are far from achieving medium-term budgetary positions that are close to balance or in surplus, the Pact's main goal. This article analyses what caused this development and asks whether there are any reasons to justify it. Furthermore, it briefly analyses whether those countries that have consistently consolidated their public budgets were forced to accept a lower rate of economic growth, or whether they had to cut back massively on public investment.