nep-pke 2005-04-09 papers

on Post Keynesian Economics

Issue of 2005‒04‒09
one paper chosen by
Karl Petrick
Leeds Metropolitan University

The Euro and the Stability Pact By Martin Feldstein

By:	Martin Feldstein
Abstract:	This paper begins by discussing the inherent conflict between the simultaneous existence of a single currency for the countries of the European Economic and Monetary Union (EMU) and the independent fiscal policies of those countries. The Stability and Growth Pact was an attempt to reconcile that conflict. I describe how EMU governments have chosen to ignore the Stability Pact's constraint on budget deficits and how they sought to undermine it by changing the rules themselves. The final part of the paper describes the actual resolution of the issue by the agreement reached at the end of March 2005 by the European Council. The new policy effectively abandons the Stability Pact and leaves the way open to much larger sustained deficits.
JEL:	F4
Date:	2005–04
URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:11249&r=pke

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