Stability in Europe Flashcards
Stability and Growth Pact
A set of rules designed to ensure that countries in Europe pursue sound public finances and coordinate their fiscal policies.
Preventative arm
Bounds EU governments to their commitments of sound fiscal policies and coordination by setting each one a budgetary target, known as a Medium-term budgetary objective.
Corrective arm
Insures the correction of excessive public budget deficits or excessive public debt levels.
It is a step-by-step approach to reining in deficits and reducing excessive debts.
Definition of an EU excessive deficit.
> 3% of GDP
Definition of EU excessive public debt.
> 60% of GDP if not diminishing at an adequate rate (defined as a decrease of 5% per year over a 3 year average)
EU Fines for countries not in compliance
- 0.2% of GDP if they fail to abide either by the preventative or corrective rules.
- 0.5% of GDP if they repeatedly fail to abide by the corrective rules.
In addition all members (except UK) could see suspension of commitments or payments from the EU’s structural and investments funds.
2011 in SGP history
In 2011 the stability and growth pact was subject to huge reform, and introduction of the six pack
When did the SGP’s corrective rules enter into force
2004/2005
When did the SGP’s preventative rules enter into force
1999
2014 in SGP history
Further reforms: introduction of the two pack, (Nov 2014), reinforces economic coordination between member states.
- The fiscal compact is introduced, outlining the importance of budgetary targets set by the SGPs preventative arm, This is part of an inter-governmental treaty known as the Treaty on Stability, Coordination and Governance (TSCG).
SGP (6 & 2 pack) was reviewed yet again late 2014/early 2015.
SGP-1 validity
1997-2005
SGP-2 validity
2005-2011
SGP-3 validity
2011-
SGP-2 budgetary reform
Pre: all had to achieve a balanced budget in MT
Post: Took into account fiscal and economic situation in each country.
