EUROPEAN FISCAL POLICY RULES: FIRST 15 YEARS

The Stability and Growth Pact has become a primary fiscal policy framework in all European countries since 1997. Together with Maastricht fiscal criteria it determines the fiscal discipline of integration process. The aim of this study is to evaluate ex-post effectiveness of the fiscal rules from the view of a primary structural balance development during 1991-2007. A method taken for the evaluation was a panel-corrected standard errors regression with fixed effects applied on the former euro zone countries (EA12), "old" EU members (EU15) and finally on the EU25, The results of the econometric estimation indicate that all considered rules were effective even though with different impacts. Furthermore, the analysis suggests that electoral cycle, among others, has strong impact on the primary structural component of public balance. However against theoretical assumptions, there is not a conclusive statistical significance of the government behaviour on the current state in the business cycle.