Stability pact and of growth
The Stability pact and of growth , or PSC , indicates a whole of criteria that the countries of the Euro area were committed respecting with respect to their partners.
The Stability pact and of growth (PSC) is the instrument with which the countries of the euro area were equipped in order to coordinate their Budget policy national and to avoid the appearance of excessive budget deficits. It forces on the States Euro area to have in the long term budgets close to balance or surplus.
The PSC is based on articles 99 and 104 of the Traité on the European Union. It was adopted with the European Council of Amsterdam the 17 June 1997. It prolongs the effort of reduction of the public deficits engaged for adhesion with the economic Union and monetarist (UEM). However, contrary to the Monetary policy, the Budget policy remains a national Compétence.
The PSC comprises two types of provisions:
multilateral monitoring, preventive provision: The States of the Euro area present their budgetary objectives in the medium term in a program of updated stability each year. A fast alarm system allows the Ecofin Council, bringing together the Ministers for the Economy and Finances of the Union, to send a recommendation in a State in the event of budgetary skid.
procedure of the excessive deficits, dissuasive provision. It is engaged as soon as a Member State exceeds the criterion of public deficit fixed at 3% of GDP, except exceptional circumstances. The Ecofin Council sends recommendations then so that the State puts an end to this situation. If such is not the case, the Council can take sanctions: deposit near the ECB which can become a fine (from 0,2 to 0,5% GDP of the State in question) if the excessive deficit is not made up.
the recent reform of the pact: At the time of the European Council of March 2005, the Heads of States and governments of the EU decided to revise the reform of the stability pact and growth. According to the new grinding of the pact, the Member States must always maintain their deficit and their national debt in lower part of the thresholds fixed respectively at 3% and 60% of their GDP.
However the rules of the pact were " assouplies" on several points: the Member States will be able to thus escape a procedure from excessive deficit since they are in situation of recession whereas this exemption was hitherto granted only to the States struck by a crisis of severe growth (involving a loss higher or equal to 2 points of GDP); the decision to initiate a procedure of excessive deficit moreover will be made only after examination of a certain number of " factors pertinents" , likely to involve the stay of the proceeding, and the deadlines will be also lengthened.
See also: Criteria of convergence
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