Tag Archives: Deficit spending

Europe’s fiscal pact: The final irony?

Illustration by Manos Symeonakis

Last Friday, December 9 — the day when 26 of the European Union’s 27 leaders agreed on a “fiscal compact” designed to save the euro and place the bloc on a sounder economic footing — marked exactly 20 years since Germany and France presided over a similar meeting that led to the drafting of the Maastricht Treaty, which became the cornerstone of the single currency.

Among the euro entry conditions agreed in 1991, a country’s public debt would have to be limited to 60 percent of gross domestic product and its deficit to 3 percent of GDP. The first countries to breach the deficit rule were France and Germany in 2003 but they voted to let each other off, thereby undermining the rules that they had been instrumental in drawing up. So, there is more than a hint of irony in the fact that two decades on, France and Germany are again at the forefront of pushing for strict budget discipline, this time as a way of keeping the euro from falling apart.

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