{"id":10766,"date":"2022-06-15T10:45:05","date_gmt":"2022-06-15T08:45:05","guid":{"rendered":"https:\/\/dezernat-zukunft.org\/?p=10766"},"modified":"2023-06-29T11:29:14","modified_gmt":"2023-06-29T09:29:14","slug":"a-proposal-for-reforming-the-stability-and-growth-pact","status":"publish","type":"post","link":"https:\/\/dezernatzukunft.org\/en\/a-proposal-for-reforming-the-stability-and-growth-pact\/","title":{"rendered":"A proposal for reforming the Stability and Growth Pact"},"content":{"rendered":"

Philippa Sigl-Gl\u00f6ckner,<\/a> <\/strong>Max Krah\u00e9, Florian Kern, Florian Schuster<\/p>\n

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There is consensus that the Stability and Growth Pact (SGP) needs to evolve. In this paper, we put forward reform ideas aimed at reducing debt levels, enabling sustainable growth and strengthening Europe’s sovereignty without a change in primary legislation. The current fiscal framework leads to a suboptimal trade-off between austerity and growth. Our proposals therefore focus on two ideas: first, putting more emphasis on the primary deficit in both the corrective and the preventive arm of the SGP; and second, simplifying and revising the preventive arm, in particular the estimation of potential output. These reforms would make the SGP more effective in reducing debt ratios, reduce the risk of contractionary austerity while allowing for growth, and contribute to economic convergence. A clearer focus of fiscal policy on primary deficits would also sharpen the distinction between fiscal and monetary policy, as monetary policy has no direct influence on the primary balance. Finally, we argue that substantive progress towards European sovereignty would require major reform. Given today\u2019s understanding of monetary policy transmission mechanisms, mechanically limiting sovereign credit at an arbitrary debt-to-GDP ratio seems particularly problematic as it can no longer be justified with the aim of avoiding fiscal dominance.<\/p>\n

\n

Um \u00fcber unsere weiteren Ver\u00f6ffentlichungen auf dem Laufenden zu bleiben, abonniert gerne unseren<\/em> Newsletter<\/em><\/a>. <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

There is consensus that the Stability and Growth Pact (SGP) needs to evolve. In this paper, we put forward reform ideas aimed at reducing debt levels, enabling sustainable growth and strengthening Europe’s sovereignty without a change in primary legislation. The current fiscal framework leads to a suboptimal trade-off between austerity and growth. Our proposals therefore focus on two ideas: first, putting more emphasis on the primary deficit in both the corrective and the preventive arm of the SGP; and second, simplifying and revising the preventive arm, in particular the estimation of potential output. These reforms would make the SGP more effective in reducing debt ratios, reduce the risk of contractionary austerity while allowing for growth, and contribute to economic convergence. A clearer focus of fiscal policy on primary deficits would also sharpen the distinction between fiscal and monetary policy, as monetary policy has no direct influence on the primary balance. Finally, we argue that substantive progress towards European sovereignty would require major reform. Given today\u2019s understanding of monetary policy transmission mechanisms, mechanically limiting sovereign credit at an arbitrary debt-to-GDP ratio seems particularly problematic as it can no longer be justified with the aim of avoiding fiscal dominance.<\/p>\n","protected":false},"author":39,"featured_media":8224,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[194],"tags":[220,227,174,55,228,285,280,281],"class_list":["post-10766","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-papers","tag-eng","tag-europa-en","tag-europe","tag-fiscal-policy","tag-fiskalpolitik-en","tag-fs-en","tag-mk-en","tag-psg-en"],"acf":[],"yoast_head":"\nA proposal for reforming the Stability and Growth Pact - Dezernat Zukunft<\/title>\n<meta name=\"description\" content=\"Institut f\u00fcr Makrofinanzen\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/dezernatzukunft.org\/a-proposal-for-reforming-the-stability-and-growth-pact\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A proposal for reforming the Stability and Growth Pact - Dezernat Zukunft\" \/>\n<meta property=\"og:description\" content=\"Institut f\u00fcr Makrofinanzen\" \/>\n<meta property=\"og:url\" content=\"https:\/\/dezernatzukunft.org\/a-proposal-for-reforming-the-stability-and-growth-pact\/\" \/>\n<meta property=\"og:site_name\" content=\"Dezernat Zukunft\" \/>\n<meta property=\"article:published_time\" content=\"2022-06-15T08:45:05+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-06-29T09:29:14+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/dezernatzukunft.org\/wp-content\/uploads\/2022\/05\/Hinntergrundbild.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1600\" \/>\n\t<meta property=\"og:image:height\" content=\"933\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Philippa Sigl-Gl\u00f6ckner\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@DezernatZ\" \/>\n<meta name=\"twitter:site\" content=\"@DezernatZ\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Philippa Sigl-Gl\u00f6ckner\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/dezernatzukunft.org\/a-proposal-for-reforming-the-stability-and-growth-pact\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/dezernatzukunft.org\/a-proposal-for-reforming-the-stability-and-growth-pact\/\"},\"author\":{\"name\":\"Philippa Sigl-Gl\u00f6ckner\",\"@id\":\"https:\/\/dezernatzukunft.org\/#\/schema\/person\/4ff85c6f0691d69676f236f6c1133d82\"},\"headline\":\"A proposal for reforming the Stability and Growth Pact\",\"datePublished\":\"2022-06-15T08:45:05+00:00\",\"dateModified\":\"2023-06-29T09:29:14+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/dezernatzukunft.org\/a-proposal-for-reforming-the-stability-and-growth-pact\/\"},\"wordCount\":234,\"publisher\":{\"@id\":\"https:\/\/dezernatzukunft.org\/#organization\"},\"image\":{\"@id\":\"https:\/\/dezernatzukunft.org\/a-proposal-for-reforming-the-stability-and-growth-pact\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/dezernatzukunft.org\/wp-content\/uploads\/2022\/05\/Hinntergrundbild.png\",\"keywords\":[\"ENG\",\"Europa\",\"Europe\",\"Fiscal Policy\",\"Fiskalpolitik\",\"FS\",\"MK\",\"PSG\"],\"articleSection\":[\"Papers\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/dezernatzukunft.org\/a-proposal-for-reforming-the-stability-and-growth-pact\/\",\"url\":\"https:\/\/dezernatzukunft.org\/a-proposal-for-reforming-the-stability-and-growth-pact\/\",\"name\":\"A proposal for reforming the Stability and Growth Pact - 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