Eastern Europe, Caucasus and Central Asia, EMU, Europe, fiscal governance, CASE Reports, Stability and Growth Pact, CASE Network Studies and Analyses, Trade, economic integration and globalization

Design and Implementation of the Stability and Growth Pact: The Perspective of New Member States

Abstract

Current developments in the design and management of fiscal rules in the European Union may have negative implications for New Member States. Loosening of the Stability and Growth Pact (SGP) and a growing degree of arbitrariness in its implementation reduce incentives for fiscal adjustment in New Member States, adjustment that would be crucial during the transition to the Eurozone. High budget deficits may prove a serious obstacle in the process of catching up of New Member States to the income levels of EU-15 countries.