TY  - JOUR
AU  - Feldstein,Martin
TI  - The Euro and the Stability Pact
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11249
PY  - 2005
Y2  - April 2005
UR  - http://www.nber.org/papers/w11249
L1  - http://www.nber.org/papers/w11249.pdf
N1  - Author contact info:
Martin S. Feldstein
President Emeritus
NBER
1050 Massachusetts Avenue
Cambridge, MA  02138-5398
Tel: 617/868-3905
Fax: 617/868-7194
E-Mail: msfeldst@nber.org
AB  - This paper begins by discussing the inherent conflict between the simultaneous existence of a single currency for the countries of the European Economic and Monetary Union (EMU) and the independent fiscal policies of those countries. The Stability and Growth Pact was an attempt to reconcile that conflict. I describe how EMU governments have chosen to ignore the Stability Pact's constraint on budget deficits and how they sought to undermine it by changing the rules themselves. The final part of the paper describes the actual resolution of the issue by the agreement reached at the end of March 2005 by the European Council. The new policy effectively abandons the Stability Pact and leaves the way open to much larger sustained deficits.
ER  -