The paper proposes a theoretical model of fiscal policy offering new insights on some of the key policy trade-offs involved in the recent reform of the Stability and Growth Pact. As suggested by the proponents of the reform, greater room for case-specific economic judgment in the implementation of the pact may improve welfare. In our model, these gains occur because the consolidation path impliedby the implementation of the pact does not discourage high-quality measures. In practice, however, the difficulty to extract true policy intent from budget figures may hinder the qualitative assessment of fiscal policy. Hence, reforming a rulesbased fiscal framework with a view to enhance its “economic rationale” would also require closer monitoring, a better grasp of the policies underlying the budget, andultimately stricter enforcement. In that sense, recent reforms are at best unhelpful.

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