The Stability Pact: Safeguarding the Credibility of the European Central Bank

Abstract
The ‘Stability Pact’ agreed at the Dublin Summit in December 1996 and concluded at the Amsterdam European Council in June 1997 prescribes sanctions for countries that breach the Maastricht deficit ceiling in stage three of European Monetary Union. This paper explores the central provisions and possible motivations of the Stability Pact as an incentive device for fiscal discipline and as a partial substitute for policy coordination and a common 'stability culture’.

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