First, we need to recall the initial objectives set for the euro and how these have changed over time, notably due to the weaknesses that came to the fore throughout the recent crisis. This also calls into question the policy choices made during the crisis and the priorities going forward.

The Stability and Growth Pact has been under fire ever since it was born. But is the Pact a flawed fiscal rule? Against established criteria for an ideal fiscal rule, its design and compliance mechanisms show strengths and weaknesses. The latter tend to reflect tradeoffs typical of...

An early criticism of the Stability and Growth Pact (SGP) has pointed to its asymmetric nature and the weak mechanisms to prevent politically-motivated fiscal policies: its constraints would bite in downswings but not in upswings, especially if, in the latter, the electoral cycle increases the...

The Maastricht Treaty is ten years old. Its fiscal rules played a key role in kickstarting and sustaining the budgetary retrenchment efforts in European Union countries in the run-up to economic and monetary union (EMU). The experience of the Maastricht-induced fiscal consolidation shows that...

The paper analyses in a simple setting a game between an inflation-conservative central bank and a fiscal authority subject to an upper limit on the budget deficit. It is shown that complementarity or substitutability between the policies and the preference of each authority for the other...

It is largely recognised that fiscal policy will have larger responsibilities for cyclical stabilisation in EMU given the loss of the monetary instrument. At the same time, the EMU's budgetary framework emphasises the need to rely on automatic fiscal stabilisers, rather than active policies in...

Under numerical fiscal rules, such as those underpinning EMU, governments have strong temptations to use accounting tricks to meet the fiscal constraints. Given these political incentives, fiscal variables that in the past were regarded as a mere residual acquire a strategic role. This is the...