Question 25 from UPSC CSE 2023 - Current Affairs

Question

Consider the following statements:
1. The 'Stability and Growth Pact' of the European Union is a treaty that limits the levels of the budgetary deficit of the countries of the European Union.
2. The 'Stability and Growth Pact' of the European Union makes the countries of the European Union share their infrastructure facilities.
3. The 'Stability and Growth Pact' of the European Union enables the countries of the European Union to share their technologies.
How many of the above statements are correct?

IASCODEX · Accepted Answer

Correct Option: A. Only one

Strategy: Focus on the core intent of the 'Stability and Growth Pact'. The Pact's mandate pertains to fiscal discipline, not infrastructure or technology sharing. Only statements referring to limiting budgetary deficits align with its known constraints; other unrelated statements should be eliminated.

Key Info: The Stability and Growth Pact (SGP), introduced in 1997, is an agreement among European Union (EU) member states that sets fiscal rules to ensure sound public finances and avoid excessive government deficits. Under the SGP, countries are required to keep their government budget deficit below 3% of their Gross Domestic Product (GDP) and public debt below 60% of GDP. The main objective is to promote fiscal discipline within the Economic and Monetary Union (EMU), particularly among countries using the euro.

- The SGP is legally binding and enforced through monitoring and recommendations by the European Commission and the ECOFIN Council (EU finance ministers). Failure to comply can result in warnings and, eventually, financial sanctions for euro area members.
- The pact applies only to fiscal (budgetary) management and does not direct countries to share physical infrastructure (such as roads, railways, or energy networks) or technological resources.
- Infrastructure sharing in the EU is facilitated separately, often through trans-European networks (TENs) and other sectoral programs via EU cohesion policy, but this falls outside the scope of the SGP.
- Similarly, technology sharing or cooperation is promoted through EU research and innovation programs like Horizon Europe and not through the Stability and Growth Pact.
- The SGP was motivated by concerns that excessive deficits and debts could undermine the stability of the euro, leading to macroeconomic instability across the union.
- The SGP consists of 'preventive' and 'corrective' arms, focusing on both preventing imbalances and correcting excessive deficits.
- Relevant foundational documents include the Maastricht Treaty (1992) and the Treaty on the Functioning of the European Union (TFEU).

IASCODEX · Answer

Option B: Only two

IASCODEX · Answer

Option C: All three

IASCODEX · Answer

Option D: None of the above statements is correct