The Stability and Growth Pact
The Stability and Growth Pact (SGP) is a central element of fiscal policy coordination in the Economic and Monetary Union (EMU). The SGP protects financial stability; helps enforce fiscal discipline, coordinates economic and budget policies within the European Union (EU) Member States to facilitate successful performance of monetary policy.
Under the provisions of the SGP EU Member States prepare annual stability (convergence) programmes and submit them to the Commission and the Council. Stability and convergence programmes contain a medium-term objective representing a budgetary position that safeguards the medium-term sustainability of public finances.
The SGP requires the EU Member States to comply with medium-term requirements regarding budgetary positionwhich has to be close to balanced or with surplus ensuring that government deficit does not exceed 3% of GDP. Member States undertook these liabilities under the Maastricht Treaty.
Exceeding these limits can result in an excessive deficit procedure requiring the Member State to take corrective action.
Examination and monitoring of the programmes also focus on the long-term sustainability of public finances. The EU institutions produce common long-term budget forecasts at the EU level and examine and monitor situation in each separate Member State.
Latvia's Convergence Programme
clearly reflects the objective of the Latvian government to ensure compliance of the fiscal policy with the Stability and Growth Pact and to become a full-pledged Member State of the European Economic and Monetary Union. The goal of the government's economic strategy is to ensure an improvement of the welfare of population by achieving convergence with the average EU level within a foreseeable period.
