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Stability Pact Hinders Labor Market Reforms, But Macro Costs Manageable

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The Stability Pact: more than a minor nuisance?
Barry Eichengreen, Charles Wyplosz

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The Stability and Growth Pact aims to help countries balance their budgets, but it may hinder necessary labor market reforms. The reasons for the Pact are not convincing, as other measures could address the risks it aims to mitigate. The costs of the Pact are front-loaded and will be less significant once budgets are balanced.