The original objective of the Stability and Growth Pact was to ensure that all members of the monetary union abided by the rules laid down in the treaty with regard to their public finances. In the event of a breach, an excessive deficit procedure was to be initiated against the member acting contrary to the rules. Liability for a country’s public debt on the part of the other members was expressly excluded. – From 2009 onward, group pressure was lost in favor of group support. Countries such as Greece, Ireland, Spain, Cyprus and Portugal were supported by the member states and the ECB on lax terms. The purpose was to avoid a breakup of the monetary union. – Admittedly, this bail-out is an invitation to other states to put off efforts to plug budget holes in reliance on help from the other members. The postponement of urgently needed measures, such as debureaucratization, the flexibilization of factor markets and the adjustment of taxation, leads to a further deterioration in the competitiveness of the member unwilling to reform and to ever higher expenditures for reform and restructuring. – See purchases, central bank, bail-out, balance sheet adjustment, deficit financing ban, deficit ratio, eurobonds, common, European debt agency, European Monetary Union, fundamental error, contingent claim, ECB sin, ECB independence, fiscal policy, Finland, Friedman thesis, guarantee, Greece crisis, Ireland crisis, moral hazard, Plan C, policy clamp, policy default, Portugal crisis, debt club, debt drug, seven percent limit, blocked account, sovereign debt repatriation, stabilization mechanism, European, stand-by credit, structural reforms, southern front, transfer union, wealth levy, debt-productivity linkage, contract fidelity, growth-debt fact, historical, forced expropriation, two-way option. – Cf. Deutsche Bundesbank Monthly Report of May 2010, pp. 12 f., p. 67 f. (critical of guarantees in the course of the European Stabilization Mechanism).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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