In the years of favourable cyclical development, there must be a sound budget surplus. This lends flexibility, i.e. “leeway”, when the business cycle weakens, and the automatic stabilisers come into play. However, if the deficit in the good years is already high, there is no margin to draw on when the economy weakens.
In this situation, the limit of 3 per cent is reached quickly. The fundamental idea behind the Pact is therefore in the good years to create room for manoeuvre via a strong budgetary situation. In this case too, Denmark is actually a good example. For a number of years, Denmark's fiscal policy has contributed to creating a robust situation for government finances.