scholarly journals The SGP – Faulty by Design or Made Faulty by Politicians? An Assessment Based on a Simulation Model

2014 ◽  
Vol 14 (3) ◽  
pp. 249-265
Author(s):  
Šárka Horáková ◽  
Robert Jahoda
Keyword(s):  
Public Debt ◽  
European Monetary Union ◽  
Budget Deficit ◽  
Real Data ◽  
Stability And Growth Pact ◽  
European Monetary ◽  
Fiscal Discipline ◽  
Growth Pact ◽  
The Impact ◽  
Initial Results

Abstract By joining the European Monetary Union (the “EMU”), member countries lost the ability to use monetary policy as a tool for macroeconomic regulation. The attention was then focused on regulation of fiscal policy and Stability and Growth Pact (the “SGP”) was the instrument agreed upon. The states of the EMU have agreed to meet the 3% of GDP requirement for the maximum annual public budget deficit. Based on evolution of public debt in member countries, we can say that the SGP has failed as a tool for fiscal discipline. In this paper, we answer the question of whether the failure was due to the incorrect concept of the SGP or whether the development of the debt was affected more by arbitrary disrespect of the agreed rules. The two reasons mentioned above are interdependent. To separate them, we construct a dynamic model of EU countries’ public debt. By using real data, we simulate the potential values of public debt in a situation where the SGP rules have been respected in recent years. Comparing the results for the potential debt given by simulation of the model with the current real values, we are able to quantify the impact of non-compliance for each country. The initial results indicate that there are both EU states where non-compliance led to a negligible increase in public debt - up to 7% of GDP - and other states where this factor caused the growth of public debt by more than 30% of GDP.

scholarly journals Is debt restructuring needed to make the Stability and Growth Pact (more) credible?

2011 ◽  
Vol 59 (2) ◽  
pp. 155-164
Author(s):  
Jens Körner
Keyword(s):  
Interest Rates ◽  
Monetary Union ◽  
Public Debt ◽  
European Monetary Union ◽  
Stability And Growth Pact ◽  
European Monetary ◽  
Debt Restructuring ◽  
Growth Pact ◽  
Starting Point ◽  
The Stability

The emergence of the so-called PIIGS crisis which in 2009 became acute due to strongly diverging risk premiums, marked the beginning of a new phase for the European Monetary Union. Whilst the run-up to EMU had been characterized by an encouraging convergence of macroeconomic fundamentals of its member countries, it is now facing a serious threat in particular due to excessive levels of public debt. In 1997, the Stability and Growth Pact introduced a mechanism designed to prevent excessive public debt of the type currently observed; the fact of the matter, however, seems to be that levels of public debt has continuously grown from one economic cycle to the next. But the SGP apparently not only failed to fulfil its aim to keep the deficit and the debt level within its limits but also suffered from a severe loss of credibility; unless some profound action is taken it may further diminish, severely hampering the loose structure of the European Monetary Union. In order to regain some credibility, mitigate financial market’s concerns and, hence, lower borrowing cost, a consolidation path is needed to returns to acceptable levels of debt in the foreseeable future. This process has already started and measures have been taken by several eurozone countries to speed up fiscal consolidation. The aim of the paper is to analyze whether or not the group of the PIIGS countries are likely to return to debt levels in accordance with the SGP criteria or if it might be necessary to undergo a process of debt restructuring or default. By analysing different scenarios where nominal interest rates on debt (r) and nominal growth rates (n) as well as gaps thereof (r-n), herein called the automatic debt dynamics, are varied, this paper comes to the conclusion, that debt restructuring or default is a likely outcome for some of the PIIGS; arithmetics is in particular playing against Greece. As disillusioning and disappointing this outcome might be for some observers, it could be the starting point for a more credible set of rules for the SGP, which the author deems to remain a crucial component in any institutional set-up within the eurozone.

Institutionelle Alternativen in der Europäischen Union: Das Beispiel des Stabilitäts- und Wachstumspaktes

2006 ◽  
Vol 55 (2) ◽  
Author(s):  
Renate Ohr ◽  
André Schmidt
Keyword(s):  
Monetary Union ◽  
European Monetary Union ◽  
Allocative Efficiency ◽  
Stability And Growth Pact ◽  
European Monetary ◽  
Fiscal Deficits ◽  
Member States ◽  
Growth Pact ◽  
The Stability

AbstractThe Stability and Growth Pact is one of the constituent pillars of the European Monetary Union. Though, meanwhile it is obvious that it will not be able to limit fiscal deficits of the member states. For this reason in this paper Coase′s thinking in institutional alternatives is applied to find a better way to increase the incentives for more fiscal stability. We present and discuss tradable deficit permits comprising market-orientated incentives for fiscal stability. It is shown that tradable deficit permits are superior from a politico-economical view as well as with regard to allocative efficiency.

scholarly journals Deficit Policy within the Framework of the Stability and Growth Pact: An Empirical Analysis

2017 ◽  
Vol 4 (2) ◽  
pp. 76 ◽  
Author(s):  
Nicolas Afflatet
Keyword(s):  
Empirical Analysis ◽  
Monetary Union ◽  
European Monetary Union ◽  
Union Member ◽  
Debt Crisis ◽  
Stability And Growth Pact ◽  
European Monetary ◽  
Growth Pact ◽  
The Stability ◽  
The Empirical Analysis

It has become common to criticize Germany and France for having broken the Stability and Growth Pact in 2003, supposedly giving way for higher deficits thereafter. However, this question has not yet been answered by the economic literature. It is closely related to the issue whether the Stability and Growth Pact had any disciplining effect on European Monetary Union member countries or not. This article examines the question whether joining the European Monetary Union or the breach of the Stability and Growth Pact in 2003 had an impact on deficits of member states. The empirical analysis shows no evidence for higher deficits after having joined the Eurozone or after having breached the Pact in 2003. These results are robust to different testing methods and when using different data samples. They can be explained with the fact that the Pact was undermined from its beginning and only had a limited disciplining effect henceforth. Otherwise the breakout of the ongoing debt crisis would hardly have been possible.

EDP could bring about a Rome-Brussels agreement

2018 ◽  
Keyword(s):  
Public Debt ◽  
Budget Deficit ◽  
Stability And Growth Pact ◽  
Content Type ◽  
Fast Tracking ◽  
Growth Pact ◽  
Target Set ◽  
The Stability

Significance The Commission recommended an EDP on November 21, on the grounds that Italy was in violation of the debt-reduction target set by the Stability and Growth Pact. This is the first step in a long procedure that could end with sanctions on Italy. Impacts Correcting excessive public debt will require tougher measures than fixing an excessive budget deficit and will be a much longer process. An aggressive move towards fast-tracking sanctions could bolster the Italian government’s anti-EU rhetoric ahead of the 2019 EP elections. If France's new economic measures do not end in a procedure against the Macron government, it may boost Rome's anti-EU sentiment.

THE EUROPEAN UNION AND ITALY RELATIONS IN THE CONTEXT OF SUPRANATIONAL FISCAL REGULATION

2021 ◽  
pp. 208-221
Author(s):  
Dmitrii О. Mikhalev ◽  
◽  
Egor’ A. Sergeev ◽  
Keyword(s):  
European Union ◽  
Budget Deficit ◽  
Stability And Growth Pact ◽  
The European Union ◽  
Internal Factors ◽  
Growth Pact ◽  
Discretionary Fiscal Policy ◽  
The Government ◽  
The Stability ◽  
The Eu

The article presents a retrospective analysis of relations between the government of Italy and the European Union institutions in the context of supranational fiscal regulation in 2002–2019. The authors analyze the influence of external and internal factors on the state of public finance in Italy, note the reasons that made it difficult to meet the requirements of the Stability and Growth Pact, study the main issues on the agenda in the EU-Italy relations and their evolution. The authors also come to conclusion that unlike the earlier discussions about correcting budget deficit in Italy, current focus of supranational fiscal governance is shifted to preventing it, what challenges the economic sovereignty of Italy and country’s opportunities to conduct a discretionary fiscal policy.

Public debts of Arab countries: selected indicators

2017 ◽  
Vol 10 (2) ◽  
pp. 321-324
Author(s):  
Gabi El-Khoury
Keyword(s):  
Public Debt ◽  
Budget Deficit ◽  
External Debt ◽  
Arab Countries ◽  
Debt Service ◽  
Goods And Services ◽  
The Impact ◽  
Public Debts

This statistical file is concerned with the issue of public debts in Arab countries. It assumes that public debt is a key source to fund the budget deficit in most Arab countries, and the rising public debt, particularly external debt, is increasingly becoming a concern for several countries in the region due to the pressure debt servicing might impose on these countries, which basically suffer an uncomfortable primary balance, in addition to the impact of crises in the region. Table 1 provides indicators on domestic public debts with ratios of debts to GDP, while Table 2 gives figures of external public debts with debt ratios to GDP. Table 3 provides estimates of total public debts with their ratios to GDP, while Tables 4 and 5 show figures of external public debt service, ratios of debt servicing to exports of goods and services and external public debt service ratios to Arab governments’ revenues respectively.

scholarly journals The Impact Of Macroeconomic Factors In Economic Growth

2016 ◽  
Vol 12 (7) ◽  
pp. 331 ◽  
Author(s):  
Alush Kryeziu
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Public Debt ◽  
Budget Deficit ◽  
Econometric Model ◽  
Macroeconomic Factors ◽  
The Public ◽  
Time Period ◽  
Macroeconomic Indicators ◽  
The Impact

In this paper will be discussed the main concepts and trends of the macro-fiscal indicators in economic growth, as well as their importance in the economic development of different countries, with special emphasis in Kosovo. One of the aims of this paper is to define and explain the connection between macroeconomic indicators with specific emphasis: the public debt, budget deficit and inflation on economic growth. In order to analyze this impact of variables in economic growth, the targeted time period of research is the period from 2004 to 2014. While the data taken regarding Kosovo were obtained from the year 2005, due to the fact that earlier the data have been limited because of the developments in which Kosovo went through. The model that best represents the link between macro-fiscal indicators on economic growth is the linear regression as an econometric model. We will have the opportunity to see and interpret these data. The overall results have emerged in accordance with theoretical discussions presented, but this relationship has not turned out to be very strong because the coefficients acquired did not have great explanatory skills for economic phenomena.

Estimated impact of COVID-19 on the Jordanian economy

2021 ◽  
Vol 5 (3) ◽  
pp. 34-41
Author(s):  
Jameel Aljaloudi
Keyword(s):  
Economic Growth ◽  
Unemployment Rate ◽  
Public Debt ◽  
Budget Deficit ◽  
International Institutions ◽  
Economic Downturn ◽  
International Labor Organization ◽  
Negative Effects ◽  
Poverty And Inequality ◽  
The Impact

This study aims to estimate the negative effects of COVID-19 on the Jordanian economy. These effects are expected to coincide with the results of studies carried out by international institutions. For example, the International Labor Organization (ILO) estimated indicate an increase in the number of unemployed to 5.3 million (the “low” scenario) and 24.7 million (the “high” scenario), from a baseline of 188 million in 2019 (ILO, 2020a). Experts from the World Bank and the International Monetary Fund (IMF) confirmed that the global economic downturn (caused by the coronavirus pandemic) is the largest in the past eight decades, which will lead to an increase in poverty and inequality and harm economic growth in the long term. (News 18, 2020). To measure the impact of COVID-19 on the Jordanian economy, the following indicators were adopted: an economic growth, an unemployment rate, a foreign trade (imports and exports), public revenues, public spending, a public debt, and a budget deficit. The study relied on data contained in reports issued by international institutions and official institutions in Jordan. The results indicate a slowdown in the rate of economic growth, an increase in the unemployment rate, a decrease in exports and imports, an increase in the public debt and the budget deficit

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