Explaining the mixed results of the EU-15 member states under the Stability and Growth pact: An analysis of domestic fiscal frameworks.

The Economic and Monetary Union of Europe is currently under pressure. As the dust of the financial crisis is currently setting, Greece saw a hard-left swing of the government in the beginning of 2015, winning on the back of an anti-austerity campaign. Greece is currently trying to find a consensus on the payback of lending’s with the troika, representing a group bailout creditors consisting of the ECB, the European Commission and the IMF, but it is not the only euro country facing economic difficulties. Since the launch of the single European currency, mutual fiscal performances have been mixed. In order to impose fiscal discipline on the Eurozone candidates, the Stability and Growth Pact (SGP) was implemented in 1997, reflecting a full set of fiscal rules and several monitoring- and correction mechanisms on a supranational level. However, after two rounds of reforms in 2003-2005 and 2010-2011, scepticism prevails. The latest reforms continue to reflect an unwillingness of member...Show moreThe Economic and Monetary Union of Europe is currently under pressure. As the dust of the financial crisis is currently setting, Greece saw a hard-left swing of the government in the beginning of 2015, winning on the back of an anti-austerity campaign. Greece is currently trying to find a consensus on the payback of lending’s with the troika, representing a group bailout creditors consisting of the ECB, the European Commission and the IMF, but it is not the only euro country facing economic difficulties. Since the launch of the single European currency, mutual fiscal performances have been mixed. In order to impose fiscal discipline on the Eurozone candidates, the Stability and Growth Pact (SGP) was implemented in 1997, reflecting a full set of fiscal rules and several monitoring- and correction mechanisms on a supranational level. However, after two rounds of reforms in 2003-2005 and 2010-2011, scepticism prevails. The latest reforms continue to reflect an unwillingness of member states to transfer the necessary degree of sovereignty over macro-fiscal objectives to the European level mirroring the need of further political integration. While these observations helps put the current tensions into perspective, they cannot explain why member states have been showing mixed results while being subjected to the same external constraints. This research will try to seek answers to this question. Where problems occur on a supranational level due to the lack of political integration, there is a need for increased monitoring on a national level. The Economic and Monetary Union of Europe is in essence a two-way relationship. In the end, the increased fiscal imbalances in the euro area as a whole and the current critical situation in some of the member states, risk undermining stability, growth and employment, as well as the sustainability of the EMU itself.Show less

Leiden University Student Repository

Documents

In Collections

Explaining the mixed results of the EU-15 member states under the Stability and Growth pact: An analysis of domestic fiscal frameworks.