Pisani-Ferry (2002) identifies a broad consensus on the need for fiscal discipline in EMU but
raises the issue about how it should be defined and/or made operational. In his view, the focus
on the deficit in the SGP is too narrow; the debt should be given more prominence. He also
touches upon the more general limitations of traditional indicators such as the deficit and the
debt in capturing all operations affecting sustainability of public finances. His proposal is to
shift away from an annual assessment of deficit figures to a medium-term-oriented approach
monitoring comprehensive public finance accounts that allow the potential impact of off-
balance-sheet liabilities to be assessed.
Beetsma and Dedrun (2003) argue that a strict implementation of fiscal rules like the SGP
may hamper structural reforms, as they may involve substantial up-front costs and thus
sacrifice future growth. Hence, a more flexible interpretation of the 3 % of GDP deficit
threshold of the Treaty is proposed, though subject to the condition that the quality of
structural reform is assessed by a politically independent institution, and that structural
reforms do not affect the long-term sustainability of public finances. This last part,
highlighting the priority of sustainability, distinguishes Beetsma and Debrun (2003) from the
advocates of economic growth.
With a view to giving the SGP more legitimacy, Calmfors and Corsetti (2004) suggest
increasing its short-term flexibility on the deficit threshold by giving more weight to elements
of long-term sustainability. In practical terms, they propose to make the deficit ceiling
explicitly conditional on the debt level, allowing low-debt countries to run larger deficits in
downswings than high-debt countries. In addition, like a large number of other proposals
across all four groups, they see the need to depoliticize the enforcement of the fiscal rules, i.e.
to limit the role of the ECOFIN Council.
In conclusion, the cluster analysis reveals a number of important differences in the way the
economics profession assessed the old SGP. These differences reflect a divergence in opinion
about fiscal policy in general. To begin with, there is no consensus about the welfare
implications of the SGP. One camp would seem to take it for granted that the SGP is an
economically desirable set of rules which needs a more or less comprehensive political-
economy type of ‘re-engineering’ in order to make it function properly. Conversely, others
hold the view that the main problem of the old SGP is its primary policy objective rather than
the political constraints ensuing from the institutional and procedural set-up. Yet another
group believes that the old SGP failed or should be improved on both accounts.
-20-