The Stability and Growth Pact. Motivation and Costs

Under the Stability Pact all member states of the future European Monetary Union commit themselves to achieving balanced budgets in a few years' time. If the agreed threshold for the public sector deficit of 3 percent of GDP is overstepped or the structural deficit continues to be high, the result is direct and indirect costs for EMU member countries. Seen at a European level, Austria's fiscal policy appears sufficiently flexible to ensure that both direct and indirect costs from the Stability Pact can be avoided. Nevertheless, it will be necessary to continue efforts to reduce the structural deficit over the next years.