National Saving and the Stability and Growth Pact

Many of the arguments used to justify the Stability and Growth Pact's concern with budget deficits in fact relate to levels of national saving. Countries with large budget deficits tend to have low levels of national saving but some countries such as the UK have low levels of national saving for structural reasons associated with the private sector. A good case can be made that budgetary targets should be tighter for countries with structurally low saving than for countries with savings levels adequate to allow wealth to grow in line with income.