There have been widespread criticisms of EMU fiscal institutions. We consider a simple alternative to the deficit ceilings envisaged in the Stability and Growth Pact. We advocate the adoption of deficit targets. National governments should retain discretion in setting deviations from targets,...

The discussion about the impact of a monetary union on the fiscal stability of individual member countries is largely confined to European Monetary Union and the Stability and Growth Pact (SGP) debate, which in turn tends to focus more on optimal fiscal rules. However, when adding insights from...