European Fiscal Policies Under the Stability Pact ; Some First Insights

EU Member countries have shown different degrees of ambition to reach a budget position of “close to balance or in surplus”. Differences in ambition can only partly be explained by the relative size of cyclical safety mar­gins or differences in the number of votes in the ECOFIN Council. It is also shown that in the medium run there is no evidence for a trade-off between budget consolidation and growth. Of the eight countries with the strongest reduction of structural budget deficits in the period 1992-2001, only one showed growth rates below the EU average. The other seven countries even managed to achieve higher growth rates than in the period 1974-91 during which structural deficits had increased.