Carmen Diaz-Roldan, Ph.D, Universidad de Castilla-La Mancha, Facultad de Derecho y CC. Sociales, Ronda de Toledo s/n, Ciudad Real, 13071, Spain
From the beginning, the success of the EMU seems to rely on the benefits of the single currency, the higher degree of integration of financial markets, and also on the sound public finances guaranteed by the set of fiscal rules provides by EMU. When signing the Stability and Growth Pact (SGP), Member States committed themselves to reach a medium-term budgetary position close to balance. In fact, the Maastricht Teatry stresses as basic that the Member States of the European Economic and Monetary Union (EMU) should avoid excessive deficits; and the reference values for deficit-to-GDP and debt-to-GDP ratios, have worked in practice as an explicit fiscal rule. But, in practice, the policy orientation of the SGP has not been fully satisfied. This has opened a debate about the utility and effectiveness of fiscal rules in EMU, and on their complementarities with discretionary fiscal policy measures and automatic stabilisers to deal with short-run fluctuations. The aim of this paper is to show whether would be useful for fiscal authorities to follow any kind of fiscal rule to reinforce the required fiscal discipline. In particular, we will analyse the interaction among those EMU members showing a relatively high level of public debt and those that follow a strict fiscal discipline, so they are able to guarantee fiscal sustainability.
JEL Classification: E62, E63, H60Key words: fiscal discipline, stabilization, monetary unions.