The year 2009 marked the tenth birthday of Economic and Monetary Union (EMU) in Europe. The Stability and Growth Pact (SGP) is one of the cornerstones of that enterprise. EMU itself is perhaps the most ambitious project of regional integration in the world: the merging of national monetary policies first by eleven, later sixteen, nation states into one is unprecedented in modern history. This phenomenal enterprise is characterised by transferring monetary policy to the supranational level on the one hand while retaining national sovereignty over all other fields of economic policy on the other. However, monetary policy is interdependent with the other areas of economic policy, notably the conduct of public finances. The viability and success of EMU therefore depends on the ability of the participating, but independent, nation states to conduct their fiscal policies in a manner that is compatible with the pursuit of a single, common monetary policy.

In theory, EMU functioning well along these lines is a collective good. We know that, short of subjecting themselves hierarchically to some Leviathan (the state), people as well as nations rely on norms to ensure the reliable provision of collective goods. One could compare it to a club. If members of a club are found not to contribute – i.e. to free-ride – or even to damage the club goods, the group enforces its norms through sanctions. Depending on the club, such sanctions take on various forms, from verbal bullying to brutal fighting.