On 2 March 2012, 25 EU Member States (excluding the United Kingdom and the Czech Republic, for the time being) signed what is known as the Fiscal Compact. The objective of this treaty is to tighten budgetary discipline within the European Union. This is achieved mainly through the introduction...

In this paper, I demonstrate that an indicator which is commonly used to assess the long-term fiscal sustainability of public finances in EU member states (“S2”) is also defined if government borrowing rates are assumed to be permanently lower than the growth rate of GDP. I illustrate this...