Stability by balanced growth: Expertise on the reform of the Stability and Growth Pact for the Group of the Progressive Alliance of Socialists & Democrats in the European Parliament

In this expertise for the European Parliament different proposals for the reform of the European Stability and Growth Pact are evaluated. The focus of the reformed pact is still on fiscal restraint, institutionalised by the 3% of GDP deficit criterion and the strengthened 60% debt-to-GDP criterion. The forthcoming pact, reformed along these lines, cannot cope with the economic challenges that led to the economic and the euro crises of the last two years. The inclusion of a framework for tackling macroeconomic imbalances could be an important step in broadening this narrow and inadequate focus. In the current form, however, a latent conflict between the excessive deficit procedure (EDP) and the new excessive imbalance procedure (EIP) exists.