The Treaty states that persistent excessive deficits are to be avoided (Article 104). The Stability and Growth Pact gives concrete expression to the obligation to ensure a government budget that is in balance over the medium term. The stability programmes stipulate how and when the objective is to be achieved.
The aim is to ensure that the stability orientation of European monetary policy is not undermined by a lack of fiscal discipline. The Balassa-Samuelson effect,10 as it is called, means that above-average growth rates in catching-up countries are accompanied by higher rates of inflation. This is the result of major increases in productivity in traded goods.