We investigate the risk that the Stability and Growth Pact may act as a constraint on the fiscal policy of EMU Member States in three respects: a) discretionary counter-cyclical policy which finds a limit in the 3 per cent of GDP threshold set for nominal deficit; b) automatic stabilisers whose...

The national debt stocks of the Euro Area countries and the UK are rising sharply as a result of the economic crisis, and equilibrium output is falling, with the capital stock contracting. Both problems could be alleviated by the rapid introduction (but slow implementation) of a policy to extend...