A Credible Stability and Growth Pact: Raising the Bar for Budgetary Transparency

Publication: Policy Letter No. 5, 2010
Topic Area: Macro and Finance
Authors: Stefan Gerlach
Date: Jan 2010
Keywords: public debt, ECB

While the Stability and Growth Pact had good intentions, it failed because nothing happened when governments broke the rules. This essay proposes an enhanced Pact with increased fiscal transparency, an independent committee of fiscal experts, and a 1% tax on new debt above the 60% debt-to-GDP ratio. This would redistribute the costs of running Europe from the countries that have their house in order to those that don’t.

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