Kopits, George; Székely, István P. --- "Fiscal policy challenges of EU accession for the Baltics and Central Europe" [2003] ELECD 116; in Tumpel-Gugerell, Gertrude; Mooslechner, Peter (eds), "Structural Challenges for Europe" (Edward Elgar Publishing, 2003)

Book Title: Structural Challenges for Europe

Editor(s): Tumpel-Gugerell, Gertrude; Mooslechner, Peter

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843764748

Section: Chapter 16

Section Title: Fiscal policy challenges of EU accession for the Baltics and Central Europe

Author(s): Kopits, George; Székely, István P.

Number of pages: 21

Extract:

16. Fiscal policy challenges of EU
accession for the Baltics and
Central Europe
George Kopits and István P. Székely1

INTRODUCTION

Fiscal policy issues occupy centre stage in the accession to the European
Union (EU). The main issues encompass: convergence to macro-fiscal ref-
erence values; fiscal costs of compliance with the regulatory framework;
and limited access to net transfers from the EU budget. For each candidate
country, these issues must be examined from the perspective of its current
fiscal position.
From the outset of the present EU enlargement process, new member
states were envisaged to be approaching the criteria for participation in
the economic and monetary union (EMU), pursuant to the Treaty of
Maastricht.2 Specifically, at the time of accession, the applicants are
expected to adopt the acquis communautaire and to adhere to relevant pro-
visions of the Stability and Growth Pact (SGP).3 On the fiscal front, EMU
prohibits direct central bank financing of public sector deficits and privi-
leged access to financial institutions, and requires approximation of the fiscal
reference values (that is, limits) on the general government deficit and gross
debt, set at 3 per cent and 60 per cent of GDP, respectively. The SGP further
prescribes a medium-term budgetary position of close to balance or surplus,
and in the euro area, it imposes financial penalties for non-compliance with
the deficit reference value.
In addition, the accession countries are expected to meet uniform EU-
wide regulations, for the most part incorporated in ...