Did the Stability Pact work?
A fundamental question is missing from the debate on the Stability and Growth Pact: has the Pact worked?
Because before wondering whether and to what extent it should be defended perinde ac cadaver , or whether and to what extent it should be suspended (and for what purpose), perhaps it would be useful to know whether and to what extent it has guaranteed us growth and sustainability. This question can only be answered with a medium- to long-term analysis. You already know the answer, but I'll put it here, since the topic has become a hot topic.
The figure represents hourly productivity in the Eurozone and the United States. The dotted line marks the date of adoption of the pro-cyclical rules known as the "Stability Pact." Before the adoption of these rules, European countries were closing their technological gap with the United States: a catch-up process was underway that had brought productivity levels to coincide. After the adoption of these rules, the Eurozone began to fall behind , losing ground to the United States. The numbers are quite telling:
The average rate of productivity growth in the Eurozone has gone from double that of the United States to less than half. The inability of national budgets to perform a countercyclical stabilization function and the compression of net public investment:
(which we talked about here ), a consequence of never having wanted to exclude production expenses from the calculation of budget parameters (i.e. of having always rejected the golden rule ), explain these disappointing results, which are not the consequence of cynical and unfair fate, but of specific economic policy choices incorporated into the European institutional framework.
Are these rules worth defending?
As strong as these words may seem, the choice is not between derogating the Pact or rigorously applying it. The choice is between derogating the Pact (and possibly repealing it) or disappearing.
I recall in fact that the Pact violates one of the fundamental characteristics of the single currency project as it was conceived and proposed in One market, one money : the ability of national budgets to respond to national and regional shocks (i.e. which affect the entire area) through the mechanisms of the welfare state and other policies :
By stripping national budgets of this flexibility, the Stability Pact was a fundamental betrayal of the single currency project. The reasons that led to proposing and accepting such a betrayal are now irrelevant: thirty years later, we must look ahead and restore rationality, putting an end to Europe's slow suicide.
That's all.
This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2026/04/il-patto-di-stabilita-ha-funzionato.html on Tue, 28 Apr 2026 06:26:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.