# Stability and growth pact (SGP)

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- Modified: 2023-07-25T21:12:01+00:00
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## Definition

a commitment by members of the European Monetary Union to balance their budgets in order to contribute to the stability of the single currency, which supports monetary policy and was adopted in Dublin in 1996. Article 126 TFEU reaffirmed the SGP. For a number of important reasons, a monetary community with a single monetary policy cannot succeed in the long run without precise coordination of the budgetary policies, which, after all, remain a matter of sovereign decision for the member states. - From Germany's point of view, the SGP was an essential business basis for monetary union. Without it, there would not have been a single currency in 1999. When, on November 25, 2003, the Ecofin Council decided not to open proceedings against Germany and France for deficit overruns, this central political consensus on stability was effectively abrogated. In general, the fact that the Council of Ministers, and not an independent rating body, is responsible for monitoring deficit levels is regarded as the serious design flaw of the pact. - In the summer of 2009, the EU decided to exclude from government debt the special-purpose entities set up to bail out banks during the financial crisis, which was rightly criticized as a "disastrous fault. In general, it is repeatedly suggested that the pact should not be based on shares of public deficits, but on government spending. - For a long time, the European Council, which is solely responsible for this under Article 15 of the EU Treaty, fundamentally opposed any improvement - i.e., tightening - of the SGP. Only at the beginning of 2013 was it possible to agree on a debt brake, to which all EU member states except the UK and the Czechs committed themselves. - See bailouts, central bank, bail-out, blame game, currency swing, age ratio, deficit financing ban, deficit ratio, demographic hardening, Ecofin Council, euro bonds, euro bonds, European Debt Agency, European Monetary Union, Fundamental Error, European Treasury, Early Warning Law, Monetary Policy, Peer Pressure, Budget Deficit, Budget Indicators, Budget Pre-Reconciliation, European, Notice of Default, Lisbon Agenda, Murphy's Law, Minhas-Gerais Problem, Sustainability, parafiscal, policy bracket, policy default, primary surplus, rule, golden, shadow state, debt club, debt brake, debt ratio, semester, European, sensitivity analysis, fiscal, solidarity, financial, public debt reduction, public debt pressure, Stability and Growth Pact, fundamental error, fiscal framework, fiscal sustainability, transfer union, contractual compliance, competitive status, international, monetary union 2, economic policy, European. - Cf. ECB Monthly Bulletin of February 2003, p. 53; ECB Monthly Bulletin of January 2004, p. 49 ff (with valuable statistics), ECB Monthly Bulletin of April 2004, p. 58 f., Annual Report 2003 of the Deutsche Bundesbank, p. 87, p. 94 ff. ("serious damage" to the Pact); Monthly Report of the Deutsche Bundesbank of August 2004, p. 66 (the Pact after the judgment of the European Court of Justice of July 13, 2004); Monthly Report of the ECB of September 2004, p. 72; Monthly Report of the Deutsche Bundesbank of January 2005, p. 43 ff. (important opinion on the "reform" of the Pact); Monthly Report of the Deutsche Bundesbank of April 2005, pp. 15 ff. and p. 23 ff. (very detailed presentation of reasons), ECB Monthly Report of August 2005, pp. 54 ff. (guidelines of the Ecofin Council), pp. 63 ff. (on the "reform" of the Pact, very detailed presentation and [thoroughly pessimistic] assessment), Deutsche Bundesbank Monthly Report of August 2005, pp. 70 f. (forecast), Deutsche Bundesbank Annual Report 2005, pp. 73 ff. (skeptical assessment), ECB Monthly Report of February 2006, pp. 79 et seq. (here, fundamental issues regarding the impact of fiscal policy on financial markets), ECB Monthly Report of April 2006, pp. 67 et seq. (in-depth discussion of the relationship between government spending and economic and financial stability), ECB Monthly Report of February 2007, pp. 77 et seq. (threats to the Pact posed by implicit government debt), ECB Monthly Report of March 2007 (interpretation issues), Deutsche Bundesbank Monthly Report of October 2007, pp. 48 et seq. (considerations on an effective limitation of government debt), ECB Monthly Report of December 2007, p. 87 et seq. (new commitments; concerns about detailed design), Deutsche Bundesbank Monthly Report of May 2008, p. 22 et seq. (deficit ratio of individual euro area member countries; [pessimistic] assessment; overviews), ECB Monthly Report of October 2008, pp. 59 ff. (ten-year anniversary of the Pact: detailed assessment; many overviews), Deutsche Bundesbank Monthly Report of December 2008, p. 33 (critical assessment in the ten-year review of monetary union), Deutsche Bundesbank Monthly Report of May 2009, p. 25 (contingent liabilities would have to be included in government debt), ECB Monthly Report of September 2009, pp. 92 f. (national government rules to accompany the SGP), Deutsche Bundesbank Monthly Report of November 2009, pp. 65 ff. (deficit procedures for thirteen euro area member states), Deutsche Bundesbank Annual Report 2009, p. 33 (increase in deficits due to stimulus programs), ECB Monthly Report of March 2010, pp. 91 f. (tabular overview of the financial position of all euro area members 2008-2012, projections from 2010), ECB Monthly Report of March 2010, pp. 50 f. (early warning right of the Commission), Monthly Report of the Deutsche Bundesbank of May 2010, p. 12 f. (on guarantees in the course of the European Stabilization Mechanism), Monthly Report of the ECB of March 2010, p. 109 ff. (far-reaching, in-depth reflections on the reform of the SGP; many overviews and [p. 130 ff.] clearly formulated conclusions), Annual Report 2010 of the Deutsche Bundesbank, p. 92 ff. (measures to contain sovereign debt), ECB Annual Report 2011, pp. 146 ff. ([too] many bodies are involved in the issues), and the respective ECB Annual Report, chapter "European Issues," Monthly Report of the Deutsche Bundesbank of April 2011, pp. 53 ff. (measures to prevent sovereign debt crises), Monthly Report of the Deutsche Bundesbank of May 2011, pp. 22 f. (debt ratio of euro area members since 2009; forecast for the year 2013), (detailed discussion of the sovereign debt crisis; many overviews; references), Monthly Report of the Deutsche Bundesbank of October 2012, pp. 13 ff. (in-depth discussion of the sovereign debt crisis in EMU; overviews; references), Monthly Report of the Deutsche Bundesbank of November 2012, pp. 22 ff. (government budget deficits in the euro area as a whole and in problem countries; overviews), Monthly Report of the Deutsche Bundesbank of August 2013, pp. 71 et seq. (new decisions on deficit procedures), ECB Monthly Report of September 2013, p. 113 et seq. (results of the strengthening of the Stability and Growth Pact; further improvements are needed), Deutsche Bundesbank Monthly Report of January 2014, p. 41 et seq. (fundamental issues; status and developments in individual EMU countries). Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent! University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec. Professor Dr. Eckehard Krah, Dipl.rer.pol. E-mail address: info@ekrah.com https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk https://www.jung-stilling-gesellschaft.de/merk/ https://www.gerhardmerk.de/

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