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N° 239 |
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| November 2004 |
| Exceptional Circumstances |
Agnès Bénassy-Quéré
Alexis
Penot |
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| The drafters of the euro area’s Stability
and Growth Pact provided for the possibility that “exceptional circumstances”
could allow member states’ budget deficits to exceed the 3% limit. But the
definition they gave has shown itself to be too restrictive: none of the countries
facing deficit problems while suffering from poor growth has been able to use
this justification. The clause therefore appears as virtual and the European Commission
is proposing to change it. What could the new definition of exceptional circumstances
be? Should a rate of growth be used, as is presently the case, but at what level?
Or should a “threshold of exceptionality” be considered? Should an
absolute standard be defined for all member states or should a standard be adapted
to the potential growth levels of different countries? The various possibilities
are examined here: they would have led to exceptional circumstances being invoked
for between 20% and 50% of the excessive deficit cases which arose from 1997 to
2003. |
Abstract |
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