Making the Euro Work

摘要

Our most fundamental policy prescription is to abandon the SGP entirely and any political constraints on national budget positions should be removed. National governments should be allowed to set fiscal policy as they deem appropriate. The view that fiscal policy has an important role to play is gaining ground. The Economist, for example (September 28, 2002), argues very strongly in favor of removing such restraints: "The euro members need to loosen their fiscal straitjacket immediately and rewrite the stability pact to take account of the cycle. Some argue that to rewrite the pact now would hurt the euro's credibility. But it is far worse to stick to a lousy policy than to admit it is wrong and change it. Ask Argentina" (p. 12). Furthermore, institutional arrangements for the coordination of national fiscal policies should be strengthened, along with new EU institutional arrangements for the operation of an EU fiscal policy. It should also be ensured that monetary authorities do not dominate economic policy-making. This goal can be achieved by introducing serious coordination of monetary and fiscal policies.