From the beginning, the success of the European Economic and Monetary Union (EMU)
seems to rely on the benefits of the single currency, the higher degree of integration of
financial markets, and also on the sound public finances guaranteed by the set of fiscal rules
provided by the EMU. When signing the Stability and Growth Pact, Member States
committed themselves to reach a medium-term budgetary position close to balance. The aim
of this paper is to investigate how fiscal discipline would be achieved. In particular, we will
analyse the interaction among those EMU members showing a relatively high level of public
debt and those that follow a strict fiscal discipline; paying special attention to the case of the
new Member States.
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