The Stability and Growth Pact, agreed upon in 1997, introduced the target of a budgetary position close to balance or in surplus as a medium-term objective for Member States. With monetary policy being conducted for the euro area as a whole, fiscal policy can be an important instrument in the hands of national governments to stabilise domestic demand and output.
Over the longer term, we need to be economically successful no less than we need to be able to defend ourselves militarily. These two factors – the economic and the military – are intertwined, and their interconnections are very complex, too complex to begin to discuss today.