Growth and Economic Development
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Growth and Economic Development

Essays in Honour of A.P. Thirlwall

Edited by Philip Arestis, John S.L. McCombie and Roger Vickerman

This valuable and engaging new book bears eloquent testimony to A.P. Thirlwall’s substantial contribution to economics over the last 40 years. The volume does not attempt to provide a comprehensive review of such a prolific figure, but rather demonstrates the considerable influence that his work on economic theory has had on his contemporaries, and the profession as a whole.
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Chapter 10: The Crisis of the Stability Pact and a Proposal

Roberto Tamborini and Fernando Targetti


Roberto Tamborini and Ferdinando Targetti INTRODUCTION At the beginning of this century, three events seemed to be giving robust impetus to the process of European unification: the birth of a single currency, enlargement to the East of the Union, and the creation of the Convention, a sort of European constituent assembly. But then, and in a partly unexpected manner, three contrary circumstances simultaneously arose: on the foreign policy front, the split caused by the war in Iraq; on the institutional front, the failure by the Intergovernmental Conference to ratify the ‘Giscard-Amato draft’; and on the economic–political one, the majority decision to suspend the validity of a treaty (the Stability and Growth Pact, SGP) taken by Ecofin (the Council of the Union’s financial ministers), contrary to the Commission’s recommendation. These obstacles seem so difficult to overcome that Michel Rocard (Le Monde, 28 November, 2004) has gone so far as to say that ‘Europe has lost its soul along the way’; and perhaps not only its soul but its body as well if, as Romano Prodi has said, Europe risks disappearing from geographical maps. The SGP is perhaps the most acute manifestation of the Union’s institutional malaise, with implications that extend beyond the sphere of economic policy and affect the very foundations of the ‘European common house’. The Treaty of Maastricht, supplemented by the SGP, in fact, prescribes that if a member country’s budget deficit exceeds 3% of GDP (purged of the estimated effects of the economic cycle), the Commission must...

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