“The Stability Pact is stupid, like all decisions that are rigid […]” this declaration made by Romano Prodi in an interview for the French newspaper: Le Monde in October 2002 had given a nasty turn to the economical and political European scene. This quotation of the former President of the European Commission is totally in line with the concerns regarding the functioning of the Stability Pact.
Established by a Resolution of the Treaty of Amsterdam (signed on June 17th 1997), the Stability and Growth Pact appears as one of the most important elements of the European Economic and Monetary Union (EMU). Indeed, the Stability Pact was created as a set of rules, in order to ensure the stability and the balance of the Euro zone. For the past few years, the Pact that binds all member states to engage in the prompt implementation of the excessive deficit procedure, is the subject of many criticisms raised by economists, political observers and above all by European statesmen, such as French President Jacques Chirac and German Chancellor Gerhard Schroeder. Many statesmen and economists argue that the rigidity of the pact is the actual cause of the European monetary's weakness. By raising this criticism, they are supporting a revision of the Pact and even some of them argue for the elimination of the pact. With no doubt, these criticisms are the source of the Pact's lack of credibility and its legitimacy is now at risk. In order to discuss the future of the Stability Pact, Jean-Claude Juncker, Prime Minister of Luxembourg and President of the Euro group since 2002, had decided to organise two meetings in Brussels during March.
Considering the criticism against it, the future of the Stability and Growth Pact seems to be an uncertain one. In order to understand the reasons behind the criticism, a thorough analysis regarding the policies of the pact is necessary. This precise presentation of the Pact will provide an opportunity to re-examine the conditions and the reasons of its establishment. Moreover, this study regarding the policies of Pact will also be a platform to analyse the criticisms raised by statesmen and economists. Secondly, an examination of the relevance of Pact's alternatives proposed by political and economical observers will help to understand: if the Pact should be maintained, reviewed or eliminated?
Following a progressive analysis of the Stability Pact, our study will try to anticipate or at least examine the unstable future of the Pact.
[...] This proposal is also based on the creation of a strong and independent Fiscal Stability Council, which appears as the only way to make rules respected. This idea developed by specialists like, Barry Eichengreen, Ricardo Haussmann and Juergen Von Hagen, who propose the establishment of an independent Committee of experts in charge of the monetary regulation and the budgetary policy of the European Union. This Council also appears as a way to prevent the collusion of States' interests. The proposal is supported by counties such as Austria, indeed as the Austrian Minister of finances Karl-Heinz Grasser says, the Pact should be reinforce in order to put an end to the countries' privileges”[6]. [...]
[...] Thus, the Stability and Growth Pact is in a transitional period. Weakened by criticisms, the Pact needs to be changed. However, economists, politicians and statesmen are not really agreed on the degree of the change that should be made in the Pact. The different meetings organised at the beginning of the month by Jean-Claude Juncker are clearly a good illustration of the European member States decisions upon this burning issue. Indeed, small countries, such as Austria, are in favour of the Pact's reinforcement in order to prevent public deficit and big countries' domination. [...]
[...] This principle is based on the idea of the development of a European monetary federalism, with the aim to orientate countries towards a better comportment. Moreover, each country will be encouraged to adopt its own rules concerning the regulation of public deficit. Considering the possibilities of a reinforcement of the Pact, we can also note a keen interest of politicians, statesmen and economists for the creation of the policy. As we mentioned before, the Stability Pact's main criticism is based on its rigidity. [...]
[...] Considering the criticism against it, the future of the Stability and Growth Pact seems to be an uncertain one. In order to understand the reasons behind the criticism, a thorough analysis regarding the policies of the pact is necessary. This precise presentation of the Pact will provide an opportunity to re-examine the conditions and the reasons of its establishment. Moreover, this study regarding the policies of Pact will also be a platform to analyse the criticisms raised by statesmen and economists. [...]
[...] Indeed, the Stability Pact was created as a set of rules, in order to ensure the stability and the balance of the Euro zone. For the past few years, the Pact that binds all member states to engage in the prompt implementation of the excessive deficit procedure, is the subject of many criticisms raised by economists, political observers and above all by European statesmen, such as French President Jacques Chirac and German Chancellor Gerhard Schroeder. Many statesmen and economists argue that the rigidity of the pact is the actual cause of the European monetary's weakness. [...]
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