What is stability and growth?

16 countries that make up the European Union in 1997 agreed to follow the national expenditure and debt with a document called Pact Stability and Growth. The EU Member Nations signed the Pact primarily to protect against inflation in their individual currencies and in the euro. The Stability and Growth Pact was modified in 2005 to provide individual nations in budgeting for economic cycles for more than a year than agreed that the budget deficit, including all national and local budgets, provides slightly greater flexibility. Stability and growth nations have also agreed that each nation's debt will not exceed 60 percent of the growth domestic product. The term gross domestic product concerns the value of all goods and services created by the nation over the period of time, usually one year. Two articles in this Agreement - Roman Treaty or Association on the establishment of the European Economic Community - will determine the legal ActLAD for the provisions of stability and growth pact. In addition to debt and expenditure limits, the pact allows warnings and then sanctions unless the limits are met.

Stability and growth pact has been criticized for being too strong and too rigid. Those who claim to be too strong point to the need for governments to have latitude in terms of debt and expenditure on the impact of an economic decline that can take much longer than a year. Others argued that the pact is soft in that the use of creative accounting can mask non -compliance and that sanctions are rarely used and too lenient to be effective.

In 2005, ZFicials altered the contract, mostly at the insistence of Germany and France. The pact was first designed in the 90's Germany. The reform remained 3 % and 60 % deficits and the level of debt on the spot, but before assessing sanctions, EU finance ministers could take into account the seriousness of HOthe lower decline and could calculate compliance with the regulations on the basis of a budget modified for the lifetime of the current economic cycle.