The Stability And Growth Pact: Lessons From The Great Recession
The Great Recession, the global financial and economic crisis that erupted in 2007, has revealed a number of weaknesses in the EU framework for fiscal surveillance and fiscal policy coordination as enshrined in the Stability and Growth Pact (SGP). First, existing provisions concerning the reporting of government finance statistics did not guarantee the necessary quality of data across all countries. Second, in the economic good years preceding the crisis the SGP did not encourage Member States to create fiscal space for bad economic times. Second, the fundamental tenets underpinning the Pact, namely that fiscal discipline coupled with low and stable inflation would be sufficient to secure overall macroeconomic stability, turned out to be wrong.