Ensuring macroeconomic stability is no longer a priority of European integration as it was ten years ago. Indeed, lower inflation and fiscal consolidation across Europe have been major achievements of the process of European Monetary Unification. The creation of an independent European Central Bank and a set of rules for fiscal discipline, has led to lower budget deficits and lower interest rates possibly conducive to higher growth. The consensus view is that priority should now be given to structural reforms directed at the supply side of the economy. However, the attention of the Sapir’s Report on improving EMU’s macroeconomic policy framework motivates a deeper investigation of the relationship between stability and growth. It is commonly agreed that fiscal stability is a precondition for growth, but the way stability is achieved matters. If stability is achieved inefficiently at the cost of introducing distortions, then a trade-off between stability and growth may emerge. This paper investigates this tradeoff and proposes a reform of the Stability and Growth Pact that deals effectively with the problems emerged in the first years of EMU.