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‘Close‐to‐Balance or in Surplus’: A Policy‐Maker's Guide to the Implementation of the Stability and Growth Pact
Author(s) -
Artis Michael J.,
Buti Marco
Publication year - 2000
Publication title -
jcms: journal of common market studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.54
H-Index - 90
eISSN - 1468-5965
pISSN - 0021-9886
DOI - 10.1111/1468-5965.00254
Subject(s) - stability and growth pact , pact , sanctions , economics , medium term , balance (ability) , term (time) , fiscal policy , stability (learning theory) , resizing , macroeconomics , international economics , member states , european union , computer science , history , medicine , physics , archaeology , quantum mechanics , machine learning , political science , law , physical medicine and rehabilitation
Under the Stability and Growth Pact, countries are committed to achieve medium‐term budget positions of ‘close‐to‐balance or in surplus’. The rationale for this commitment is that such budgetary positions would allow for the full working of the built‐in stabilizers without triggering the sanctions procedures of the Pact. This article sets out to show how quantifications of the medium‐term (structural) requirement can accommodate the desired aim and suggests how fiscal measurement and forecasting errors as well as the budgetary effects of ageing may be allowed for. All in all, broadly balanced budgets in the medium term appear to be ‘roughly right’ for most euro‐zone countries. Of course, as the cyclical behaviour of the euro‐zone economy adapts to the new EMU environment, the medium‐term targets will need to be addressed again.