The Stability and Growth Pact (SGP) as adopted by the European Council in 1997 and amended in 2005 by the Council during the Luxembourg presidency is a tool used by the countries of the Eurozone (EMU) in order to coordinate budgetary and economical policies. The Pact relies on the timely and multilateral monitoring and follow-up of national financial policies in the EMU member states.
Corrective arm :
SGP requires that member states monitor the following targets:
- Government deficit below 3% of GDP,
- Public debt level below 60% of GDP
The purpose of the corrective arm is to solve rapidly any Excessive Deficits. Intermediary detailed reports are submitted to the European Commission twice a year (due 1 April and 1 October).
Preventive arm :
Each member state has to prepare an annual stability programme detailing national budget policies in the mid-term with projections on the following 4 years (rolling period of 5 years including the current year) which is submitted to the Commission. This programme sets a MTO (medium-term budgetary objective) in terms of structural balance to be met and/or a tailored adjustment path to reach this objective.