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N° 286 |
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| 2 April 2009 |
| Bad Weather for the Stability and Growth Pact |
Agnès Bénassy-Quéré
Marcos Poplawski Ribeiro |
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| Everywhere in the world, the need for fiscal stimulus has caused a severe deterioration of fiscal balances and raised the
unavoidable question of debt sustainability. In the Euro area, the recent initiation of Excessive Deficit procedures by the
European Commission against the countries with high deficits has heated this debate. Still, the Euro area needs a credible
scheme of budgetary discipline that would allow fiscal authorities to reassure sovereign debt markets and to dissipate the
reticence of the ECB in adopting a policy of quantitative easing. That would also facilitate the implementation of fiscal
stimulus packages, which could open an exit away from the crisis. Such a scheme should be designed to enforce more
discipline, but also more counter-cyclical fiscal policies. |
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