This paper reviews the controversy over Europe's Stability and Growth Pact and offers a proposal for its reform. It argues that Europe would be best served by focusing on the fundamental causes of unsustainable debts - public enterprises that are too big to fail, unfunded public pension schemes...

We assess the fiscal behaviour in the European Union countries for the period 1990-2005 via the responsiveness of budget balances to several determinants. The results show that the existence of effective fiscal rules, the degree of public spending decentralization, and the electoral cycle can...