The SGP and the ‘Golden Rule’

Abstract

The slowdown in growth in 1998 and its possible implications for the level of unemployment raised worries and doubts concerning the fiscal rules set in the Treaty of Maastricht and in the Stability and Growth Pact. It has been argued that these rules may represent an excessively binding constraint for appropriate counter-cyclical action and that the attempt to reach rapidly a budget position ‘close to balance or in surplus’ may worsen the slowdown. The risk that the rules may permanently reduce the public sector’s contribution to capital accumulation has also been pointed out.