Stability and Growth Pact

The stability and growth pact constitutes the framework for Member States’ budget policies – and for their budget discipline.

The core elements of the pact are: total debt must not exceed 60% of GDP and the annual deficit must not exceed 3% of GDP. Every year, each Member State that has introduced the euro presents an updated stability programme to the Council and the Commission. This contains medium-term budget objectives, the adjustment pathways to be followed to meet these objectives, as well as the likely development of public debts and the economic situation.

With the reform of the stability and growth pact in 2005, economic evaluation of individual cases moves into the foreground for application of the pact. Prior to initiating a deficit procedure, the European Commission will take much more account of exceptional circumstances. And periods of strong economic growth should in future be used more fully for budget consolidation.

In a joint currency area binding regulations are important to ensure financial and budget discipline. The stability pact is the basis for more growth and jobs in Europe. In principle the BDI therefore works actively to ensure the Maastricht criteria are applied strictly.

Despite the current crisis the stability and growth pact should not be thoughtlessly dismissed. In this situation the pact’s flexibility mechanisms should be applied. However, the medium-term objective of balanced budgets can only be achieved with an intact stability and growth pact.