The new EU Stability and Growth Pact – new bottle with a lot of old wine

The article reviews the latest version of the proposal for a new Stability and Growth Pact of the European Union, as accepted by the European Parliament in April 2024. After summarising the main changes, the macroeconomic evaluation attempts to gauge whether the main goal of the Pact – reduction of the public debt level in high-debt countries– is likely to be achieved or missed due to counter-productive austerity. Four scenarios show the trade-off between debt reduction and the growth of primary public expenditures. Overall, the new Pact includes some advantages, but it is unlikely to reduce high debt down to 60 per cent of GDP and at the same time grant fiscal leeway for more infrastructure and climate policy. Milder but longer austerity will be a heavy burden for the future – stretching the pain seems to be the guideline. It might turn out to be more pain than gain.