Reforming the Stability and Growth Pact: Size and Influence in EMU Policymaking

The Stability and Growth Pact, originally designed to protect the integrity of monetary union based on price stability and fiscal discipline, has created a rift between states and institutions. Larger states like Germany and France have repeatedly violated the terms of the pact, while smaller states like the Netherlands and Austria have steadfastly defended it. This paper explores how size has affected the economic interests of the Eurozone countries and how these interests will translate into policy changes, taking into account the possibility of coalitions forming between states as well as across institutions, with the European Central Bank taking the position of the smaller states in defending the original pact.