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The 2008 financial crisis and Stability and Growth Pact II? Let us move on to SGP III: "A la carte"

  • Economics


After the fuzziness in Europe that surrounded the implementation of the excessive deficit procedure foreseen by the Stability and Growth Pact (SGP), the European Union had to restore the credibility of the weakened fiscal rule. The constraint was to keep alive the Treaty of Amsterdam. Indeed, an attempt to make major changes to the SGP would have necessitated a new Treaty. This could have meant no more Europe-wide fiscal rule. But are minor changes enough in light of the 2008 financial crisis? This paper addresses this question by deciphering the amended version of the SGP, and finds that, in the case countries still breach the SGP, another minor change is possible: an "A la carte" version of the SGP.

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