The EMU Stability and Growth Pact: Is it dead? If so, does it matter?

IN DECEMBER 2004, the new Barroso Commission brought the saga of the French and German infringements of the Stability and Growth Pact to a close by lifting the "excessive deficit" procedure launched in 2003. That same month, the Commission launched infringement proceedings against Greece that has been providing inaccurate public deficit statistics since the creation of the Pact in 1997. The new head of the Commission also declared that there would be no major overhaul of the Pact. In the November 2003 crisis, when the Council suspended the implementation of the Pact at a time France and Germany overshot its deficit ceiling, most observers called the Pact dead and many rejoiced since the Stability and Growth Pact had come under heavy criticism for some time. A year after, we asked four leading scholars that have studied monetary integration: have news of the death of the Stability and Growth pact been grossly exaggerated? Should it be resuscitated? Why or why not? Amy Verdun and Nicolas Jabko argue that the Pact will survive for lack of an alternative able to gather the support of a large bipartisan cross-national coalition. Henrik Enderlein then argues that the pact should not be fixed but broken. Finally, Andrew Martin explains why the real problem does not so much lie with the Pact per se, but instead with the philosophy behind the EMU policy mix (restrictive fiscal and monetary policies). It creates vicious circles: By keeping economic growth too low the European central bank retarded the expansion of public revenue, making it more difficult to meet the Pact requirements.