where there is more of a consensus about the goals, instruments and institutional framework
of monetary policy-making.
The fact that the EMU is a unique construction adds to the fiscal policy debate. The euro area
is the first monetary union in history where a group of independent countries have handed
over their monetary sovereignty to a common central bank, the European Central Bank
(ECB), while retaining domestic control over fiscal policy-making, thus giving professional
economists new turf on which to test their ability to present policy proposals. And as we will
demonstrate, they have used this opportunity amply.
The paper is organised as follows. Section 2 reviews the history of the SGP. This survey is
crucial to understand the economic and political background of the many proposals for
reform. Section 3 examines and organises 101 proposals of reform of the SGP using cluster
analysis. To this end, each proposal is classified according to a number of variables such as
the main policy objective pursued and the proposed degree of policy modification involved.
Section 4 compares the actual reform of the SGP adopted by the Council of the European
Union with the academic debate reflected in the 101 proposals. Section 5 offers an
explanation of why there are more than one hundred proposals on the intellectual market for
reforming the SGP. Here we answer the question: why do the views of academic economists
differ so widely on fiscal policy-making in the EU? The final section concludes.
2. Sailing with the SGP: A historical overview
The SGP provides the framework for the co-ordination of national fiscal policies for Europe's
monetary union. It was established to address the risk of negative spillovers from the
budgetary positions of individual Member States into the common monetary policy. It
consists of (i) a preventive part which, in its pre-reform version, required Member States to
aim towards a medium-term budgetary position of 'close to balance or in surplus', and (ii) a
corrective part laying out procedural provision for the correction of an excessive deficit, that
is a deficit above the reference value of 3 % of GDP.2
Whether there is a need for a common framework for fiscal policy co-ordination and, if so,
how it should be designed, has never stopped being debated, though the intensity of the
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