Reforming the Stability and Growth Pact in Times of Crisis

It is a commonplace that the mechanisms established in the stability and growth pact are blunt instruments. They are highly politicised as both the establishment of infringements and possible sanctions are subject to votes in the EU Council. The financial crisis of 2009/10 has dramatically altered the financial situation of many EU member states and has also shown the need for new regulatory instruments to enforce budgetary discipline in the Euro zone. Figures on the EU member states’ budget debts from 1999 to 2010 support this argument empirically. We discuss the current reform proposals and show that the introduction of a reversed qualified majority is likely to strengthen substantially the position of the European Commission to sanction non-complying member states. This becomes possible because decisive players in the EU Council will be closer to the position of the Commission.