Do the MTO’s Cyclically Adjusted Budget Balances Serve Their Purpose? An Analysis and a Reform Proposal
The Stability and Growth Pact (SGP) is up for review. It is also in urgent need of reform if rule-based fiscal policy is to be maintained without impeding the recovery from the Covid crisis, without standing in the way of achieving the climate targets, and without undermining European sovereignty in an era of new geopolitical challenges. Yet, legislative reform faces significant challenges, given the position of countries such as Germany. Thus, we argue that a first reform step that is both viable within the current framework and supportive of economic recovery and growth could be a useful start.