The current budgetary problems of some EU member states have intensified the
debate on Europe’s fiscal policy framework. It is not enough to change the
interpretation of the Stability and Growth Pact. More fundamental revisions of
the EU Treaty are needed in order to strike a reasonable balance between longrun
sustainability and short-run flexibility. The ceiling on budget deficits should
be conditioned on the government debt level, such that the scope for stabilisation
policy in downswings is increased in low-debt countries. In addition, the enforcement of the rules should be depoliticised: decisions on sanctions against
states violating the rules should be transferred from the political level of the
Council of Ministers to the judicial level of the European Court of Justice.