Stability Pact

The Stability Pact, often referring to the European Union’s Stability and Growth Pact, is a set of rules designed to ensure that countries in the EU manage their budgets responsibly. Its goal is to prevent excessive government borrowing that could threaten financial stability in the eurozone. Countries agree to keep their budget deficits below 3% of their gross domestic product (GDP) and their overall debt below 60% of GDP. These rules encourage sound fiscal policies, helping maintain economic stability and confidence within the euro area, but they also allow flexibility during economic downturns.