In 2004, both some EMU Member States (Germany, Greece, the Netherlands and France) and six new Member States (the Czech Republic, Cyprus, Hungary, Malta, Poland and Slovakia) were in an excessive deficit situation. Although, the new Member States have generally lower debt ratios than the euro area countries, they have two additional incentives to lower their government budget deficits.
First, the failure to fulfil fiscal Maastricht criteria could derail the entry to EMU. Second, reasonably sound public finances are crucial for an effective and exhaustive use of structural EU funds. At this point let me make a few remarks on the Stability and Growth Pact.