European Fiscal Policies Under the Stability Pact - Some First Insights

EU Member countries have shown different degrees of ambition to reach a budget position of close to balance or in surplus. Differences in ambition can only partly be explained by the relative size of cyclical safety margins or differences in the number of votes in the ECOFIN Council. It is also shown that in the medium run there is no evidence for a trade-off between budget consolidation and growth. Of the eight countries with the strongest reduction of structural budget deficits in the period 1992-2001, only one showed growth rates below the EU average. The other seven countries even managed to achieve higher growth rates than in the period 1974-91 during which structural deficits had increased.