"Fiscal convergence and stability in the EMU: Alchemy, missed opportunities, and commitment institutions"

Since the spring of 2002, there has been renewed debate and discussion regarding the value and pertinence of the Stability and Growth Pact (SGP) of the European Monetary Union (EMU). This debate arose because Germany and Portugal have breached the reference value set out in the SGP for budget deficits, and France and Italy are dangerously close to breaching it. Furthermore, France has until now categorically refused to respond to warnings from the Commission and the Council of Ministers, and, therefore, play by the rules of the SGP. In light of this alleged crisis in the EMU, the paper explains how the crisis came to take place, to what extent the EMU's fiscal policy institutions are to blame, and how, as a result, they can be improved. Finally, it assess whether the alleged SGP crisis threatens the future stability of the EMU