6533b837fe1ef96bd12a3825

RESEARCH PRODUCT

FISCAL DISCIPLINE IN THE PIIGS COUNTRIES IN THE LIGHT OF THE NEW FISCAL TREATY. WOULD IT HAVE BEEN DIFFERENT?

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In this paper we analyze the fiscal discipline in the PIIGS countries during the last three decades using the Maastricht convergence criteria. We also explore the effects of the new rule established by the recent Fiscal Treaty on the fiscal positions of these countries. The analysis shows significant budgetary adjustments in the post-Maastricht period in all the PIIGS countries. By contrast, the public debts have been increasing even after the introduction of the 60% of GDP ceilling, except for Ireland. The 0.5% of GDP limit for the structural deficit would have led to significantly better fiscal positions if the rule would have been introduced ten years ago.