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The Stability and Growth Pact

The Stability and Growth Pact

The Stability and Growth Pact (SGP), introduced initially in 1997 as a Resolution of the Amsterdam European Council, constitutes a rule-based framework for the coordination of national fiscal policies in the European Union. The Macroeconomic Imbalances Procedure (MIP) operates alongside the SGP to identify and correct macroeconomic imbalances and monitor competitiveness developments.

The SGP contains two arms: the preventive arm seeks to ensure that fiscal policy is conducted in a sustainable manner over the cycle, while the corrective arm sets out the framework for countries to take corrective action in the case of an excessive deficit. The corrective arm is made operational by the Excessive Deficit Procedure (EDP), a step-by-step procedure for correcting excessive deficits that occur when one or both of the rules that the deficit must not exceed 3% of GDP and public debt must not exceed 60% of GDP (or at least diminish sufficiently towards the 60%) defined in the Treaty on the Functioning of the EU are breached.