Institutional limits debts and deficits  Since large public debts have highly adverse consequences for the economy, a number of institutional arrangements have been adopted to limit debt accumulation in the euro area and the European Union more broadly.
It is useful to distinguish between rules on deficits and  9  Temporary increases in inflation can arise from a wide variety of price level shocks such as increases in energy prices or exchange rate changes. 10  While tighter fiscal policy can in theory be stimulatory, in practice it more likely that it will be contractionary.