Public Finances in EMU-2002

Abstract

Fiscal policies in the recent juncture: responding to the cyclical slowdown ...2001 proved to be the most challenging period for fiscal policy in the three-year history of EMUas the global slowdown provided the first real stress test of EMU’s multilateral surveillanceframework, and especially its budgetary dimension. The budget deficit for the euro area reached1.3% of GDP, up from 0.7% in 2000. Despite this first reversal in the process of budgetaryconsolidation since 1993 and criticism about perceived failure to strictly adhere to the provisionsof the Stability and Growth Pact (SGP), there are several grounds for considering the frameworkfor budgetary aspects of the multilateral surveillance framework have performed well inresponding to the cyclical slowdown.