Fiscal policy and political limitations in the European Union

In the Euro zone unlike monetary policy, fiscal policy has to be coordinated with the limitations imposed by the Stability and Growth pact. Continuous violations of the Stability and Growth Pact by the powerful members of the European Union such as Germany and France have stymied the progress that has been made in the formation of a single currency. This article examines the delicate nature of this pact and the policies needed to maintain its success. Flexibility of policies in the intermediate may be needed so that members can maintain their positions without paying huge financial penalties.