Thursday, May 06, 2004

EU deficit rules - an utter shambles

Source: Bloomberg

Alongside Germany, France and Italy, to name but a few, who have exceeded the deficit limits set by the Growth and Stability Pact, enter the accession countries, who are doing likewise, turning the Pact into an utter shambles.

Poland and five others of the new entrants breached the limit last year, the Czech Republic's by 12.9 percent of gross domestic product, Poland 4.1 percent and Hungary 5.9 percent. Malta, Slovakia and Cyprus also breached the limit.

And what is the Commission doing about this, one might wonder. The answer is… nothing. It plans to excuse the rule-breakers on the grounds of the “special circumstances'' of their joining the bloc. Furthermore, neither is the successor to Pedro Solbes – he of Eurostat fame - Joaquin Almunia, prepared to set a date when the defaulting countries must come into line.

Not that these countries can be penalised for breaking the rules, as they have not yet joined the euro although, like Grodon Brown, they are obliged to stay in line under the Maastricht phase two agreement. As always in the EU, it seems rules are rules, except when they are broken, when they do not seem to matter. Would that our traffic police took such a flexible view.

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