EMU Stabilitetspakten Stability and Growth Pact

Vi ser nu att stabilitetspakten verkligen honoreras.
Det är inget tvivel om att både tyskar och fransmän är inriktade på att klara detta, trots sina bekymmer.
Det sätter en norm för framtiden och därför känner jag mig trygg i den delen.
Göran Persson i Tiden (s) nr 3, 2003

EU om Stabilitetspakten
Konkret består stabilitets- och tillväxtpakten av en resolution från Europeiska rådet (antagen i Amsterdam den 17 juni 1997) och av två rådsförordningar av den 7 juli 1997 som anger detaljerna för pakten (övervakning av de offentliga finanserna och samordning av den ekonomiska politiken; genomförandet av förfarandet vid alltför stora underskott). Efter diskussioner om hur stabilitets- och tillväxtpakten ska fungera ändrades de två förordningarna i juni 2005.
Läs mer här

European Commission warns Italy it must act to cut national debt
FT 23 May 2018

Monti called the breaches of the Maastricht Treaty limits on deficit ceilings by France and Germany,
soon after the launch of the single currency, the "worst mistake in the EU in the past ten years".
CNBC 11 Jan 2012

SPIEGEL Interview with Ex-ECB Chief Economist Issing
Issing: My confidence in the sustainability of such resolutions has always been limited. But it was completely shaken when Germany and France mutually killed the pact in 2003. At the time, several European finance ministers said to me: How are we to convince our citizens to support a stability pact if not even Germany wants to abide by it?
Otmar Issing, Der Spiegel 23/3 2011

Sverige, Estland och Luxemburg
Den ekonomiska krisen har slagit sönder många länders offentliga finanser.
3 av 27 länder som inte är föremål för EU:s underskottsförfarande
Anders Borg DN Debatt 2010-07-13

The French and the Germans have once again been discussing whether /Stability Pact/ sanctions should be automatic or not.
For Jean-Claude Trichet to issue an official note of disagreement – after European Union finance ministers last week drafted a watered-down sanctions package – is extraordinary
Wolfgang Münchau, FT 25/10 2010

The real irony is that the pact, in whatever form, is not even relevant to the eurozone’s future. This may be a shocking statement. But look at the evidence. Contrary to popular narrative, fiscal profligacy played only a minor role in the eurozone’s sovereign debt crisis. Successive Greek governments cheated, but on my information, this occurred with at least partial knowledge of the senior European officials involved in the process. They chose not to apply the pact for political reasons.

Om Sverige hade varit medlem i EU i början av 1990-talet hade vi i så fall kanske lämnat unionen vid vår 90-talskris, säger Heikensten

EMU är fast växelkurs in absurdum. Om det går illa för Tyskland, vilket det nu gör, kan Tyskland inte ändra sin växelkurs, den ligger fast för alltid, eller åtminstone till EMU kraschar, vilket det kommer att göra. Det kommer att ske när dollarn faller och Europa drabbas av massarbetslöshet.
Och så är det den förfärliga Stabilitetspakten. Den bygger på den i grunden felaktiga tanken att när det blir dåliga tider och statens skatteinkomster sjunker och utgifterna för arbetslösheten ökar, då skall staten skära ner på sina utgifter eller höja skatterna.
Rolf Englund i EU-krönika i NWT 2001-08-10

New rules are needed to underpin the eurozone in the post-crisis world. The stability and growth pact has failed.
To avoid moral hazard, these rules must admit the possibility of sovereign default.
FT editorial July 13 2010

SPIEGEL: Despite all of these efforts, the central problems with the euro remain. Strong economies belong to the same currency union as weak ones like Greece. Is the euro not doomed to failure?

Thomas Mirow, head of the European Bank of Reconstruction and Development:
There are also big differences between the states in the US.
The question is, to what degree are the states there for each other and if there are effective balancing mechanisms. That was kept from the public for a long time.

Der Spiegel 6 July 2010

"intellectually and politically schizophrenic"
The current debt crisis is a direct result of a governance structure for the single currency that was excessively respectful of national economic sovereignty.
Peter Sutherland, former European Union commissioner, FT 30 June 2010

The “stability pact,” could never be a reliable foundation upon which to build. Its implementation was to be left to national governments and they themselves would be entitled to vote on whether they should be sanctioned for breaches of the pact. The current debt crisis is a direct result of a governance structure for the single currency that was excessively respectful of national economic sovereignty.

The implausible insistence that Greece’s financial problems were a matter for Greece only was the surest possible way of ensuring that they would become a pressing matter for the whole eurozone.

The chances that governments would obey the rules did not exactly brighten when
Romano Prodi, Commission president from 1999 to 2004, asserted in October 2002 that the stability pact was “stupid”
because it provided for sanctions on countries already in financial difficulties.
Tony Barber, FT October 11 2010

“He’s an honest man, dedicated to European integration. His heart is in the right place. But we felt straightaway that he shouldn’t have said that,” says one former commissioner.

A big step towards fiscal federalism in Europe
When the euro was born everyone knew that sooner or later a crisis would occur.
It was also clear that the stability and growth pact was – as I have said before – “stupid”
Romano Prodi FT May 20 2010

When the euro was born everyone knew that sooner or later a crisis would occur. It was inevitable that, for a such a bold and unprecedented project, in some countries (even the most virtuous ones), mistakes would be made and unforeseeable events occur.

It was also clear that the stability and growth pact was – as I have said before – “stupid”, not because it was mistaken in its objectives, but because it was founded on purely mathematical parameters without any discretionary powers or political instruments to enforce it.

Germany and France were the first countries to violate it, although not in a destabilising way: their finance ministers decided to ignore the objections of the European Commission (possibly because they were “too big to fail”).

Due to political difficulties it was not possible to protect the euro. I was warning years ago that, through no one’s fault in particular, extraordinary events could occur that would force joint co-ordination of fiscal policies. Then the Greek crisis arrived

"I am sure the euro will oblige us to introduce a new set of economic policy instruments.
It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created."
Romano Prodi, EU Commission President. Financial Times, 4 December 2001

Själv ser /Göran Persson/ faror som är långt farligare än Greklandskrisen.
– Jag trodde en gång i tiden att stabilitetspakten var lösningen på den här knuten, men det visar sig att den inte var det. Så då får man väl hitta en annan konstruktion. Det är klart att jag vill se hur den ser ut innan Sverige kan gå med.

– Svenska folket har sagt nej till ett euromedlemskap med tydlig majoritet. Vi ska inte aktualisera en ny folkomröstning förrän vi har ett riktigt folkligt krav på det. Och det har vi inte idag
Göran Persson. e24 2010-05-19

"Ländernas konkurrenskraft har också betydelse för valutans stabilitet."
DN huvudledare 7/5 2010
"Slutsatsen är att det behövs grundligare kontroller och analyser av både euroländernas statsbudgetar och ekonomier. Det var förödande att de politiska ledarna vid 2000-talets mitt luckrade upp stabilitetspaktens regler, men ländernas konkurrenskraft har också betydelse för valutans stabilitet."

Germany
Four professors will launch a legal challenge in early May at the Verfassungsgericht (high court).
Should they secure an injunction, EMU may fly apart.
EMU shut the warning signals, disguising risk.
What investors overlooked is that currency risk mutates into default risk in a monetary union
The EU-IMF "therapy" of deflation for Greece repeats the catastrophic errors of Chancellor Heinrich Bruning in the early 1930s and must lead to a depression
Ambrose Evans-Pritchard, 25 Apr 2010

Frankfurter Allgemeine Zeitung oozed indignation.
“Germany is meant to take responsibility for Greek debts – that’s not how the idea of the euro was sold to the Germans,”
the conservative newspaper noted in reference to the single currency’s founding treaty, which banned bail-outs.
Financial Times February 11 2010

Överskottsmålet bör behållas på nuvarande nivå och i nuvarande form, men
bestämmas i lag och följas upp tydligare.
Finansdepartementet i en departementsskrivelse 1 februari 2010

Uppföljningen av målet kan dock bli tydligare. Det gäller bland annat vilka indikatorer som bör användas för att följa upp överskottsmålet och hur regeringen tar hänsyn till konjunkturläget vid uppföljningen.

Arbetsgruppen poängterar samtidigt att uppföljningen inte får bli för mekanisk. Det riskerar att leda politiken fel. Hänsyn måste också tas till osäkerheten i bedömningen och riskbilden. Att regeringen skulle vikta de olika indikatorerna som Riksrevisionen och Finanspolitiska rådet föreslagit avråder arbetsgruppen från, eftersom det skulle ge en för mekanisk uppföljning av överskottsmålet.

Stålbad för greker och press på euron
Den statsfinansiella krisen i Grekland har vuxit till den största oroshärd som eurosamarbetet haft att hantera sedan euron infördes 1999.
Greklands budgetunderskott ska enligt den nu godkända stabilitetsplanen från Aten dras ned under taket på 3 procent av BNP i EU:s stabilitetspakt till 2012, en ambition man delar med rader av europeiska regeringar som till följd av finanskris och recession bryter mot paktens regler.
DN/TT 2010-02-03

A principled Europe would not leave Greece to bleed
Trichet failed to note that there had long been a double standard – in effect two Maastricht treaties, one for the large and powerful countries, another for the smaller and less powerful.
When France broke the EU edict not to let debt exceed 3% of GDP, there were strong words, but little else.
Joseph Stiglitz guardian.co.uk, 25 January 2010

For the ECB to announce that it will not accept Greek bonds as collateral would be counterproductive. For the ECB to delegate judgments about the credit-worthiness of Greek bonds to the rating agencies would be more than just irresponsible; it would be reprehensible /Synonyms: blameworthy, blamable, blameful, censurable, culpable, guilty, reprehensible. /blameworthy behavior; blamable but understandable resentment; blameful impulsiveness; censurable misconduct; culpable negligence; guilty deeds; reprehensible arrogance./

With Europe's economy still weak, an excessively rapid tightening of its budget deficit would risk throwing Greece into a deep recession.

We are headed towards a situation in which the risk of financial distress and contagion leads to an unconditional bail-out, whether or not Greece is reforming sufficiently.
The reasons we are at this juncture lie in the nature of the stability and growth pact. It is a fair-weather construction, ill-suited to crisis.
Wolfgang Münchau, FT December 13 2009

I almost fell off my chair when I heard Angela Merkel say that the European Union might sometimes have to take charge of the fiscal policies of highly indebted members. Does this mean that the German chancellor is abandoning her attachment to a rules-based system of fiscal policy co-ordination? Probably not quite

Thirteen members of the European Union have been told to take action and get their budget deficits back in line.
EU requirements mean that they should not exceed 3% of the country's GDP.
However, since the financial crisis most countries have broken that rule.
BBC 11 November 2009

Deadlines ranging from 2012 to 2014 have been issued.
France, the UK, Spain and the Irish Republic have longer to comply because their economies have worsened since the original deadline was imposed in April.
France has already warned that it will not meet the new deadline. The government wants to focus on boosting growth rather than cutting spending.
Germany and six other countries have until 2013.
Belgium and Italy have the tighter deadline of 2012

EU's economy commissioner, Joaquin Almunia, saved his harshest criticism for Greece. Mr Almunia said the country had taken "no effective action".

Time for the ECB to get serious about the overvalued euro
The euros nominal and real appreciation since the end of 2000, resumed with a vengeance during 2009.
The strength of the currency is hurting the exporting and import-competing sectors of the Euro Area.
Unemployment and excess capacity continue to rise.
Willem Buiter's Maverecon October 18, 2009

EU economies are bound by the Stability and Growth Pact which limits budget deficits to three percent of GDP.
However a 2005 revision of the pact allows government's to exceed this level under exceptional circumstances,
an alteration they have taken full advantage of in the current climate.

Twenty of the EU's 27 members have now been the subject of some form of deficit action from the European Commission, meaning a report with a timetable to bring deficits down.
EU Observer 20/10 2009

Forecasts released earlier this year by the former centre-right government of Greece predicted a deficit of 3.7 percent of GDP for 2009. But new figures released by the country's central bank now say it is more likely to exceed 10 percent of GDP, and could hit 12 percent.
"I have to say that I am very impressed by the difference between the old and the new figures," said the meeting's chairman, Jean-Claude Juncker, with characteristically dry sense of humour.

Ireland is ECB's sacrifical lamb to satisfy German inflation demands
Put bluntly, Ireland is being forced to roll back the welfare state and tighten fiscal policy
in the midst of a savage economic contraction
in order to uphold the deflation orthodoxies of Europe's monetary union.
Ambrose Evans-Pritchard, Daily Telegraph 12 Apr 2009

It could be that future generations of German politicians find ingenious ways around the balanced budget law.
Or that they find a two-thirds majority to overturn it.
Or that Mr Sarkozy or his successors follow Germany into a future of austerity.
But as long as one of those three events fails to happen, Germany may discover that unilateral fiscal rigour in a monetary union could prove extremely costly.
For the sustainability of the euro, you surely do not want to get into a position where a large member state has a rational economic reason to quit.
So if Germany and France really do what they both promise, you may as well start the egg timer.
Wolfgang Münchau, Financial Times June 28 2009

A decision was taken recently in Berlin to introduce a balanced-budget law in the German constitution.
It was a hugely important decision.
From 2016, it will be illegal for the federal government to run a deficit of more than 0.35 per cent of gross domestic product.
From 2020, the federal states will not be allowed to run any deficit at all.

Unlike Europe’s stability and growth pact, which was first circumvented, later softened and then ignored, this unilateral constitutional law will stick.
I would expect that for the next 20 or 30 years, deficit reduction will be the first, second and third priority of German economic policy.
Wolfgang Münchau, FT. June 21 2009

"Some thougths about the future of the euro"
The real threat to the cohesion of the monetary union is not Italy, or even a post-property-crash Spain.
The real issue is the political gulf between France and Germany.
Susanne Mundschenk and Wolfgang Münchau, Eurointelligence 18/10 2007

Jag undrar hur länge det dröjer innan det stora staterna i Europa börjar på att säga att
det är orimligt att all makt ligger hos Centralbanken
Fransmännen talar ju redan om ett stabilitetsråd
och om man skall lyfta dessa saker till europeisk nivå, vilket jag mycket väl tror kan bli resultatet av EMU,
då byter vi karaktär på den europeiska unionen och går mot en mer federativ lösning.
Göran Persson 1997-10-13

At no time were the countries of the European Union economically prepared to adopt a single European currency.
Yet political expediency accompanied by jealous anti-Americanism led 12 European countries to surrender national monetary policy without the necessary ingredients in place for an optimal currency area, especially labour mobility and fiscal equalisation.
Ironically, in the planning phase of this exercise Germany was concerned that its long-term record of low inflation might be put at risk by Italian fiscal profligacy in a currency union. It was Germany, therefore, that drafted and imposed the stability and growth pact on all future eurozone participants.
Uwe Bott, President, Cross-Border Finance, New York, Letters FT 20/1 2005

Comment by Rolf Englund:
Of course the Stability Pact is stupid.
But the real intent of the pact was to calm the german voters fear.
Now the pact can be amended.

infrastructure
While a simplistic stability pact may have been the right choice when the euro was in its infancy,
Europe can no longer afford to stick with such a rudimentary instrument.
Mario Monti FT 8 October 2014

By failing to recognise the proper role of public investment, it has pushed governments to stop building infrastructure just when they should have built more.

- Jag vet hur viktig stabilitetspakten är för mig som anhängare av en nationell finanspolitik men en europeisk penningpolitik.
Det som ska förena eld och vatten där är stabilitetspakten.
Göran Persson i Europa-Posten nr 7/2002

Italy’s PM Matteo Renzi wants the EU’s budgetary rules to be interpreted more loosely – so that money spent for ‘growth-enhancing’ purposes does not count as part of the budget deficit.
At a summit at the end of June, EU leaders agreed that they should make “best use” of the flexibility in the Stability and Growth Pact.
Crucially however, the rules were to remain the same.
Nevertheless Italian officials have been holding this up as a significant blow-to-austerity victory.
EU Observer 7 August 2014

Rehn: The French government has begun structural reforms, but the economic outlook has also simultaneously and unexpectedly worsened. France must now persuade the European Commission and its European partners that it will get its public finances in order in medium-term.

SPIEGEL: What use is it, then, if Europe obliges itself to ever greater budgetary discipline, but in reality is constantly making concessions?

Rehn: I don't make any trade-offs when it comes to the Stability Pact rules. The reformed pact places an emphasis on making public finances sustainable in the medium-term. In the short term, certain divergence can be accepted under the condition that a country is implementing reforms.

So we are relying on partnerships, but we are also prepared to initiate sanctions instruments if necessary.
Olli Rehn, Der Spiegel 4 March 2013

In the early 2000s, Germany was struggling to adhere to euro-zone criteria aimed at ensuring common currency stability.
Instead of introducing austerity, however, Chancellor Gerhard Schröder simply launched an effort to change the rules.
New documents show just how key his role was in weakening the Stability Pact.
Der Spiegel, 16 July 2012

Den europeiska mardrömmen
Tyskland är inte Sverige i kvadrat. Tysklands problem är långt värre än så.
Arbetslösheten överstiger 10 procent, tillväxten är närmast obefintlig, budgeten går med underskott,
banksystemet skakar, risken för deflation är överhängande och landets industri befinner sig i en svår kostnadskris.
Den tyska utvecklingen är en europeisk mardröm, vars slut vi ännu inte sett skymten av.
Peter Wolodarski DN 27/4 2003

När den första Greklandskrisen bröt ut våren 2010 kunde euroländerna välja mellan två vägar:
1. Respektera fördragsbestämmelserna om att EU-institutioner och övriga länder inte får ta över ansvaret för ett enskilt medlemslands statsskuld.
2. I stället bryta mot fördraget och ge finansiellt stöd.
Som bekant valdes väg 2.
Lars Calmfors, Kolumn DN 27 juni 2012

Ett skäl var rädslan för att statsbankrutter skulle skapa en ny finanskris. Ett annat skäl var den felaktiga uppfattningen att euron inte skulle överleva statliga betalningsinställelser.

The next government in Germany should start to cut spending by 2011 at the latest
to help achieve a balanced budget, European Union finance ministers said at a meeting in Brussels today.
Bloomberg March 10 2009

After conducting “expansionary” fiscal policy this year and next to combat its deepest recession since World War II, Germany should “reverse the fiscal stimulus in order to support significant budgetary consolidation,” the EU finance chiefs said in a reply to budget plans presented by Germany.

Jean Claude Juncker announced that
the deadline for a balance budget is postponed from 2010 to 2012
Eurointelligence 3/6 2008

By the way, the finance ministers chose a most interesting venue to announce the new policy of fiscal profligacy – the halls of the European Central Bank, which celebrated its 10th birthday yesterday. Quite a birthday present!

Germany needs to formulate a response to Sarkozy or the only proposal on the table will be Sarkozy’s anti-stability, anti-competition, pro-currency-intervention proposals.
Wolfgang Münchau, Eurointelligence 12/7 2007

Sarkozy’s postponement of the balancing of France’s budget in compliance with the European Union stability and growth pact by two years until 2012 has immediately attracted widespread condemnation by the European Commission and several EU governments
This hurried, almost mechanical reaction is misguided
Charles Wyplosz, FT July 5 2007

I would expect serious political tensions to emerge inside the eurozone – especially between France and Germany.
One should remember that the euro would not exist today if during the 1990s these two countries had not papered over their philosophical differences over the right conduct of monetary and fiscal policy.
Wolfgang Munchau, FT July 2 2007

Another source of conflict is Mr Sarkozy’s repeated threat of a co-ordinated policy to drive down the euro’s external exchange rate. I assume a new exchange-rate strategy is what Mr Sarkozy has in mind as he plans to set out his vision for greater economic policy co-ordination within the eurozone at the next Ecofin meeting in Brussels. I am not sure how Angela Merkel, the German chancellor, will react to this. But when Mr Sarkozy attacked the European Central Bank during his election campaign, Ms Merkel immediately paid a visit to Frankfurt to demonstrate her commitment to the central bank’s independence and the goal of price stability.

Faktum är att de flesta av EU:s stora projekt ligger i ruiner.
Stabilitetspakten som skulle garantera budgetdisciplin hos EMU-medlemmarna har ingen legitimitet sedan både Tyskland och Frankrike bryter mot den, för att inte tala om Italien.
PM Nilsson, Expressen 25/3 2007

Joaquín Almunia, EU monetary affairs commissioner 280-page report on the low pace at which countries have adapted to the euro since its launch in 1999.
fear that a downturn could exacerbate problems in unreformed economies and heighten political and public criticism of the euro
Financial Times 23/11 2006

His report warns finance ministries that the current economic upswing masks long-term problems which could undermine the euro’s stability. It focuses on countries that deviate most from the eurozone average in growth, inflation and competitiveness: Germany, Italy, the Netherlands, Portugal, Spain and Ireland.

Mr Almunia’s reports says such divergences, if they continue, could lead to tensions and complicate the eurozone’s “one-size-fits-all” interest rate policy.

Spain has boomed in the eurozone with low interest rates fuelling a massive rise in house prices, but the report highlights problems.

He admitted that citizens had yet to be convinced of the euro’s benefits, hinting at political problems if they came to believe the single currency was harming national economies.

However, Mr Almunia and Jean-Claude Trichet, governor of the European Central Bank, fear that a downturn could exacerbate problems in unreformed economies and heighten political and public criticism of the euro.

"tensions" from "persistent divergences in growth and inflation" among its members, the European Commission warned
The report represents one of the sharpest official warnings that the euro remains fragile
Wall Street Journal 23/11 2006

In a report, the commission said the euro has established itself "as a strong and stable currency" in the eighth year of its existence, but warned that "this is not to say that the euro area is functioning with full efficiency," pointing to continued high inflation and high growth in countries such as Greece and Ireland, compared with sluggish performance and small price rises in Germany and France.

The report represents one of the sharpest official warnings that the euro remains fragile and was accompanied by calls for better coordinated fiscal policies among the 12 countries that use the currency.

Jean-Claude Juncker, the Luxembourg prime minister and euro-group chairman, said that finance ministers must work more closely with the European Central Bank and that the zone's inflation and growth gaps pose "a potential problem for cohesion" if the current economic recovery peters out.

Comment by Rolf Englund:"a potential problem for cohesion" = Eurospeak för att EMU kan spricka

Individual governments, using the same monetary policy, retain power over spending and EU officials lament that no strong rules exist to control their behavior. Although deficits are shrinking, officials yesterday said this could change in an economic downturn as each government fights for itself.

Jean-Claude Trichet, European Central Bank president, on Friday delivered a stiff warning to eurozone finance ministers to back off in an escalating dispute over the bank’s independence.
Mr Trichet pointed out that it was his signature on euro banknotes and that it was unlawful under the EU treaty for finance ministers to give instructions or try to influence the bank.
Financial Times, 9/9 2006

Jean-Claude Juncker, Luxembourg prime minister, was on Friday given a second two-year term as political head of the eurozone.

Mr Juncker said he had only agreed to carry on chairing the eurogroup – the political arm of the single currency – after finance ministers supported his plan to have an "intensified dialogue" with the ECB.

He said he "fully respected" the principle of independence for the ECB and that he did not want to influence its decisions, but...

Europe has to face threat of US trade deficit
This cumulative process could be enough to send some European economies into recession.
With this separation of monetary and fiscal responsibilities, there is virtually no feedback from larger budget deficits in the form of higher interest rates and a weaker currency that would otherwise discipline fiscal authorities. The revision of the growth and stability pact only exacerbates this problem by substantially weakening the Maastricht treaty that required eurozone countries to limit their fiscal deficits and national debt.
Martin Feldstein, FT August 1 2006

Stability pact
In a report to be published on Tuesday, Mr Almunia will say.
"On average the structural balance for the EU [in 2006] will not improve and for some member states will even deteriorate, turning the fiscal stance expansionary and pro-cyclical."
Financial Times 13/6 2006

Joaquin Almunia, EU monetary affairs commissioner, is due to say that finance ministries have not kept their promises under the new-look stability and growth pact to use the good times to put their finances in order.

One year after the pact was rewritten, Mr Almunia is to argue that the loosened fiscal code has worked better than expected in bringing the worst budgetary offenders like Germany and France into line.

Germany’s national economic strategy consists of two planks, budgetary consolidation and a beggar-thy-neighbour real devaluation inside the eurozone as Germany improves its competitiveness through wage moderation.
One could make a case for budgetary consolidation during a cyclical upswing, but a systemic policy of real devaluation is destructive from the perspective of the eurozone as a whole.
Wolfgang Münchau, Financial Times 15/5 2006

As the economy goes through a cyclical upswing, one would have expected the period of wage moderation to come to an end. But the opposite is the case. Real wages not only continue to decline, but do so at an increasing rate. No wonder domestic consumption is so weak. If people expect to earn less money in future, they hold back on consumption today. German consumers act in a far more rational manner than they are usually given credit for.

Instead of seeking to resist the dollar’s shift to a more competitive level,
governments in Europe and Asia should focus on developing policies to maintain aggregate demand in their individual economies as their export sales decline.
Martin Feldstein, Financial Times 26/5 2006

- Det borde ha stått klart för alla att kollisionen mellan denna valutapolitik och de tidigare kostnadsstegringarna i kombinatione med den internationella konjunkturnedgången, finans- och och fastighetskrisen och neddragningarna i offentlig sektor riskerade att skapa en sysselsättningskatastrof.
Hur ska man förklara den närmast dogmatiska envishet med vilken åtgärder för att motverka den exceptionella sysselsättningsnedgången avvisats?
Lars Calmfors på DN Debatt 92-11-26

Vid presentationen av Lars Calmfors rapport om stabilitetspakten deltog statsminister Göran Persson som åhörare. Han förklarade sig också vara bekymrad över den kris som pakten har hamnat i
- Stabilitetspakten står och faller med Tysklands nya regering. Nu måste de två stora partierna, kristdemokrater och socialdemokrater, hitta lösningar tillsammans. Jag hoppas på Angela Merkel och Franz Müntefering, eftersom alternativet är så skrämmande, kommenterade Göran Persson.
Ref i DN 9/11 2005

Han skilde sig från Lars Calmfors som anser att stabilitetspakten inte längre går att rädda, efter den långa raden av övertramp från Tyskland och andra EU-länder.

Även Rolf Englund deltog som åhörare och delade uppfattningen att pakten är död
- Men gör det något? Prodi och The Economist anser att pakten är "stupid" och dess syfte var väl främst att få med det tyska folket och parlamentet på att överge D-Marken för den kommmande Spagettivalutan, sade han på frågestunden, efter statsministern från Sverige och Gunnar Örn från Dagens Industri.

Barry Eichengreen (University of California, Berkeley and CEPR) and Charles Wyplosz (Graduate Institute of International Studies, Geneva and CEPR) examine the rationale and likely effects of the Stability and Growth Pact in a chapter in new book, EMU: Prospects and Challenges for the Euro, published for CEPR (London), CES (Munich) and DELTA (Paris) by Blackwell Publishers.
They conclude that the Pact is unnecessary and fundamentally harmful.
http://www.cepr.org/press/EP26CWPR.htm

based on doctrinal arguments, the SGP favours the public good "public finances soundness", rather than the public good "macroeconomic stability" (i.e. reduction of length and amplitude of slowdown phases) which is at the basis of high growth and low unemployment.

”Stabilitetspaktens framtida tillämpning står och faller med hur tyskarna hanterar sin situation. Så länge Tyskland inte har ordning på sin finanspolitik har vi ingen fungerande stabilitetspakt.”
Det sa statsminister Göran Persson i samband med ett seminarium på tisdagen om stabilitetspaktens framtid, enligt Gunnar Örns referat.

Göran Persson var med vid toppmötet då stabilitetspakten klubbades igenom av Helmut Kohl och Theo Waigel, Tysklands dåvarande förbundskansler och finansminister:
”De insåg att den europeiska valutaunionen står och faller med finanspolitisk disciplin. Den bedömningen är lika riktig i dag.”

- Dilemmat, enligt Göran Persson, är att Tyskland har en konkurrenskraftig exportindustri i kombination med fallande inhemsk efterfrågan. Strukturella reformer får effekt först på några års sikt. Under tiden måste det bli finanspolitikens uppgift att hålla ekonomin i gång.

Kommentar av Rolf Englund: Hur skall det gå till när det hindras av stabilitetspakten. Se nedan om Brüning.

Pakten har urvattnats så mycket att den inte längre fungerar, menar Lars Calmfors.
Lars Calmfors, What Remains of the Stability Pact and What Next? SIEPS 2005:8
DN, Johan Schück, 8/11 2005

Det är inte första gången som Lars Calmfors är inne på liknande idéer. Inför det svenska avgörandet om euron förespråkade han att ett liknande finanspolitiskt råd skulle inrättas om Sverige kom med i EMU. Men det nya förslaget är mer omfattande, både när det gäller rådets tänkbara roll och genom att det riktar sig till alla EU-länder.

- Jag vet hur viktig stabilitetspakten är för mig som anhängare av en nationell finanspolitik men en europeisk penningpolitik. Det som ska förena eld och vatten där är stabilitetspakten.
Göran Persson i Europa-Posten nr 7/2002

EU:s ekonomiska stabiliseringspakt hotas av ett sammanbrott. Men den svenska regeringen och euroanhängarna vill inte debattera problemen av rädsla för att störa den kommande folkomröstningen.
Lars Calmfors DN Debatt 9/12 2002

Germany’s incoming “grand coalition” of Christian Democrats and Social Democrats is about to commit the biggest economic policy error since unification – the attempt to pursue budget consolidation at the expense of all other economic policy goals. In doing so, it risks turning a five-year-long stagnation into a full-scale depression.
It would be more accurate, perhaps, to compare her /Ms Merkel/ to Heinrich Brüning, a Christian conservative who was German chancellor from 1930 to 1932.
Wolfgang Munchau, Financial Times, 7/11 2005
Wolfgang Munchau is an associate editor of the Financial Times

Vad blev det kvar av stabilitetspakten?
Lars Calmfors och Anders Borg
SIEPS tisdagen den 8 november 2005, 9.00 - 11.30

Bra tillfälle att fråga Anders Borg om hans uttalanden:
»Mycket av det som många med mig trodde var välfärdsstatens kris på 1990-talet visade sig vara något som mer hängde ihop med felvärderad växelkurs och dålig makroregim än med grundläggande strukturfel.«
och "Verkligheten tvingar alla partier att anpassa sig. I vårt fall tror jag att den förändring vi nu är inne i försköts på grund av Carl Bildts starka ställning, hans enorma förtroende efter Bosnien gjorde att den här processen inte kom i gång så tidigt som den borde. Erfarenheten från de borgerliga regeringsåren – till exempel kronförsvaret – borde direkt efter misslyckandet ha värderats med mer kritiska ögon"
Klicka här

The leaders of Germany's government-in-waiting agreed on Monday night to make spending cuts worth at least €35bn by 2007 in order to bring the budget deficit back in line with the European Union's fiscal rules
Financial Times 25/10 2005

Stability Pact
How long can Germany play the "Reunification Card" as "exceptional conditions"?
What about France? What's its excuse? Is France undergoing reunification? Is France undergoing a shortage of brie?
Michael Shedlock 14/6 2005

How long can Germany play the "Reunification Card" as "exceptional conditions"? From now until doomsday? I mean really, how long can an exception last before it becomes the rule rather than the exception? What about France? What's its excuse? Is France undergoing reunification? Is France undergoing a shortage of brie? I admit the latter would be a total and complete travesty of justice but to the best of my knowledge, there is no brie shortage in France. How long can a country with no perceptible "exceptional conditions" get away with playing the "exceptional conditions" card? I have no doubt now that Portugal will somehow be claiming "exceptional conditions" quite soon. I can't wait to hear the excuse.

Meanwhile, some people are worried about the spread of SARS or the Bird Flu Virus. The real question to be answered is this: Is anyone paying attention to the rampant spread of "exceptional conditions"? Whatever strain of virus it is, it seems to be impervious to anti-viral efforts. Take a look a Germany. Wow! If the US ever catches that strain of the ECV (Exceptional Conditional Virus) we are in trouble.

The problem is that anyone who tells the truth would be fired or not reelected. People want to hear lies even when those lies do nothing but make problems worse. However, it now is readily clear that Issing and to a lesser extent Trichet, have both caught ECV. In light of that fact, I now confidently predict that the EU will soon be on the way to ZIRP (Zero Interest Rate Policy) next up after Japan.

Italy on Tuesday became the the first country to face disciplinary action under the European Union's revamped stability pact amid fears that public borrowing in the eurozone is getting out of control.
The European Commission wants to crack down on Italy's ballooning budget deficit to set an example to other countries and to prove that the eurozone can still maintain budgetary discipline.
Financial Times 8/7 2005

In spite of interest rates at historic lows, strong world demand, low inflation and healthy corporate profitability, the eurozone growth outlook is gloomy.
A stability trap?
"If the eurozone were no longer an area of stability, I think that some countries - particularly Germany - might say that a return to a national currency would create more stability."
Ralph Atkins FT May 27 2005

The ECB has acknowledged recent differences in growth rates between fast-growing countries such as Spain, and Germany and Italy, both of which have been in recession in recent quarters. But differences in fiscal deficits, trade balances and house prices are more striking, making harder the operation of a "one-size-fits-all" interest rate policy.

Joachim Fels, economist at Morgan Stanley, adds that the effects of a fiscal stimulus are dissipated in rigid economies such as those of the largest eurozone members. "If you don't have the flexible economy, much of the demand stimulus would spread into prices," he argues. His fear is that the long-run consequence would be eurozone "stagflation" - stagnant growth combined with higher inflation. "I'm not saying that would happen, but you would see such tendencies."

There is a risk that such pressures might even lead to the break-up of the eurozone, Mr Fels adds. "If the eurozone were no longer an area of stability, I think that some countries - particularly Germany - might say that a return to a national currency would create more stability."

Portugal admitted that its deficit could hit 6.8% of GDP in 2005.
Brussels said Italy had miscounted its budget figures in 2003 and 2004.
BBC 23/5 2005

The misleading inclusion of certain revenues brought Italy just within EU guidelines in those years;
in fact, according to the Commission's statistical office, it should have been just outside.

Hanteringen av stabilitetspakten visar också hur EU:s regler tillämpas olika för stora och små länder.
Det är svårt att förstå varför regeringarna i till exempel Danmark, Finland, Nederländerna, Sverige och Österrike inte utnyttjat sin vetorätt utan gett efter.
Lars Calmfors DN Debatt 3/4 2005

Stabilitetspakten har utgjort en grundpelare för det ekonomisk-politiska samarbetet inom EU. Pakten består av regler som syftar till att upprätthålla budgetdisciplin i medlemsländerna. De reformer som nyligen beslutats av EU:s finansministrar innebär emellertid att regelsystemet i praktiken sätts ur spel. Det finns därför skäl att analysera vad som hänt.

EU tycks ibland locka fram de sämsta sidorna i politiken: att frångå de principer man egentligen är överens om så fort det är politiskt opportunt. Hanteringen av stabilitetspakten visar också hur EU:s regler tillämpas olika för stora och små länder. Det är svårt att förstå varför regeringarna i till exempel Danmark, Finland, Nederländerna, Sverige och Österrike inte utnyttjat sin vetorätt utan gett efter.

Without the Stability Pact there would have been no support in Germany for the new currency.
The motto back then was: "The euro will be as strong as the deutsche mark."
The only thing that still matters to them is to somehow survive the next election.
None of the finance ministers and political leaders cares about the next generation and the common good of Europe.
Theo Waigel, Germany's finance minister from 1989 to 1998, Wall Street Journal 1/4 2005

Without the Stability Pact, though, there would have been no support in Germany for the new currency. The motto back then was: "The euro will be as strong as the deutsche mark." This statement was filled with real meaning when the criteria for joining the single currency were rigorously enforced in 1997 and 1998. Back then, all politicians from all parties together with all the major social organizations and institutions in Germany agreed on the stability course.

The German chancellor, meanwhile, simply accuses his critics of economic incompetence. That's some cheek coming from someone who presides over record unemployment and zero growth, and whose finance minister breaks all the promises he has made in the last few years.

- Jag vet hur viktig stabilitetspakten är för mig som anhängare av en nationell finanspolitik men en europeisk penningpolitik.
Det som ska förena eld och vatten där är stabilitetspakten.
Göran Persson i Europa-Posten nr 7/2002

Defanging the stability pact is not necessarily a bad thing
The Economist 22/3 2005

The one-size-fits-all interest rate of the unified currency has put stress on a number of European economies, including Germany’s.

Having given up the power of setting interest rates—and thus the ability to use monetary stimulus to help bring their country out of recession, many argue that governments in the euro area need more, not less, fiscal flexibility.

Fears about the outlook for German growth are likely to intensify after a survey showing business confidence in Europe's biggest economy tumbling unexpectedly for a second consecutive month.
FT 23/3 2005

The Munich-based Ifo institute said its business climate index had fallen from a revised 95.4 in February to 94.0 this month. Persistently high oil prices and the euro's strength were blamed by economists.

The survey comes as European Union leaders meet in Brussels to discuss measures to boost the EU's poor growth performance under the so-called Lisbon agenda.

Despite all its initial tough talk, the Stability and Growth Pact has delivered neither growth nor stability.
Will the new, relaxed version of the pact do a better job, or has it been reduced to the point of irrelevance?
Does it even matter?
BBC 23/3 2005

Nine years after it pushed the rest of the European Union into signing up to the pact, which threatened near automatic penalties against future eurozone countries running excessive budget deficits, Germany has led to victory a campaign to have its rules diluted.

The pact was a misguided solution to a non-existent problem
Financial Times Lex 22/3 2005

Welcome as it may be, the end rarely justifies the means. In purely economic terms, it is tempting to cheer the dismemberment of Europe's stability and growth pact.

The economies of western Europe remain a pretty diverse lot. They also lack many of the mechanisms to promote adjustment across the eurozone. Labour and capital mobility are too small to be much help, while automatic payments from booming to depressed regions are virtually absent on a European level.
With devaluation no longer an option, that leaves national fiscal policies as the key tool to cope with divergent growth patterns.
All this suggests the pact was a misguided solution to a non-existent problem. Fears that irresponsible governments would drive up borrowing costs for the area always sounded like politically motivated scaremongering. After all, fiscal sinners would continue to be penalised by markets, given official assurances that the European Union or the European Central Bank will never finance a bail-out. The snag is that the haggling over the pact has made it much harder to believe those assurances.

Germany would be able to cite the costs of its reunification as an excuse for breaking the European Union’s stability and growth pact.
Since Germany spends 4 per cent of its GDP on transfers to the former communist east, the concession could help Gerhard Schröder to avoid further reprimands under the pact before next year’s general election.
Financial Times 21/3 2005

European Union finance ministers on Sunday night agreed on sweeping plans to rewrite the EU’s stability and growth pact, clearing the way for flexible new fiscal rules to be agreed at a summit on Tuesday.
Under a breakthrough compromise deal, Germany would be able to cite the costs of its reunification as an excuse for breaking the European Union’s stability and growth pact.
Berlin was said to be happy with the deal, which would allow EU members with deficits above the pact’s 3 per cent of GDP limit to cite the costs of “the reunification of Europe” as a mitigating factor. Since Germany spends 4 per cent of its GDP on transfers to the former communist east, the concession could help Gerhard Schröder, German chancellor, to avoid further reprimands under the pact before next year’s general election.

Det finns ingen trovärdig vändpunkt i sikte. I dag står cirka 5,2 miljoner tyskar utan arbete.
Lärdomen från Tyskland är att det är helfel att slå sig till ro och hoppas på att den traditionella modellens exportindustri och stora socialsystem ska lösa problemet.
Problemet är att /den tyska/ regeringen har väntat och väntat med reformerna
PJ Anders Linder SvD 20/3 2005

Tyskland har nyligen genomfört reformer av arbetsmarknad och socialförsäkringar, som hade betraktats som politiskt omöjliga för bara några år sedan. A-kassan har fått en bortre parentes och arbetsförmedlingarna satsar mer på aktivt jobbsökande. Reglerna för anställningsskydd har blivit friare för de allra minsta företagen. Och i torsdags presenterade förbundskansler Gerhard Schröder fler reformförslag, bland annat sänkt företagsbeskattning.

Problemet är att regeringen har väntat och väntat med reformerna och genomfört dem först under galgen. Och det tar tid för strukturreformer att få genomslag, allra helst när de trots all sin laddning är begränsade i omfattning. Nu växer arbetslösheten trots liberaliseringarna och vill det sig riktigt illa hamnar den nya politiken i dålig dager innan den har fått chans att nå effekt.

Tysklands stora misstag är inte att en motvillig regering till sist tänkte nytt utan att man under så lång tid satt fast i tanken att samhälls- och välfärdsmodellen var färdig. Exportindustrins imponerande insatser bländade beslutsfattarna till den grad att de inte blev varse stelheterna och tillkortakommandena i tjänstesektorn och entreprenörskapet, och välfärdsåtagandena hade blivit heliga hos bägge de stora partierna.

Jean-Claude Trichet, president of the European Central Bank, called on member nations to uphold rules enforcing fiscal discipline, warning that the stability of the euro and the bloc's economy are at stake.
His comments before the European Parliament in Brussels come just days before this weekend's meeting of EU finance ministers trying to overhaul the tattered Stability and Growth Pact.
Wall Street Journal 15/3 2005

Meanwhile, European Commission President Jose Manuel Barroso said he would defend a contentious plan to deregulate services by allowing service providers such as lawyers, construction workers or doctors to work outside their home countries anywhere in the EU.

Standard and Poor's, the credit rating agency, last week published a report in which it warned that a further relaxation of the /stability/ pact would undermine bond ratings in the long run
Wolfgang Munchau, Financial Times 14/3 2005

Financial markets have been too optimistic about the long-term fiscal sustainability of some of the eurozone's member states. They never attached much credibility to the "no bail-out" clause - under which the ECB is prohibited from taking on the debt of countries in financial distress - even though it is explicitly established in European law and the ECB's founding charter. The markets assumed that problems, were they to arise, would be shared among all participants. In particular, the markets thought that no country would default on its outstanding debt.

Investors are best advised to treat the debate over "reform" of the stability pact for what it is: a charade to let governments off the hook. Instead, they should take a hard look at the long-term sustainability of public finances in each eurozone member, taking account of the deficit, the net debt and other long-term obligations such as pensions. On this account, it is difficult to justify some of the present bond valuations.

Moving the Goalposts: How Reform of the Stability and Growth Pact Could Undermine Eurozone Sovereign Ratings

European firms are becoming more and more voluble about the damage the weak dollar, and strong euro, is doing to their profits.
French defence contractor Thales became the latest to warn of lower sales and profits.
The euro has gained more than 50% over the past three years.
BBC 11/3 2005

Its comments come a day after luxury goods firm LVMH and Volkswagen both said the euro's surge against the dollar was hurting their plans.

On Friday morning, one euro was worth $1.34, not far below late December's all-time high of $1.3637.

There is a growing risk that the European Union will be left either with an unreformed pact no one honours
or a reformed pact so riddled with exemptions as to be in practice worthless.
Primary responsibility for the failure to reach agreement lies with Germany, which insists that unification transfers and EU contributions be exempted from the 3 per cent deficit ceiling.
Financial Times editorial 10/3 2005

A poll of 70 of the largest US employers in Germany found that a third of these companies planned to cut their workforce and pull production capacity out
Financial Times 8/3 2005

High costs and a rigid labour market are driving US manufacturers away from Germany in spite of the government's efforts to attract foreign investment, according to a survey published on Tuesday.
A poll of 70 of the largest US employers in Germany, including such blue chip brands as Coca-Cola, Ford, Wal-Mart and Procter & Gamble, found that a third of these companies planned to cut their workforce and pull production capacity out of the country this year.
The survey, conducted by the Boston Consulting Group on behalf of the American Chamber of Commerce in Germany, which was due to be presented to the German parliament on Tuesday evening, is a blow to Chancellor Gerhard Schröder's government, which has pushed through an unprecedented string of economic reforms in the past two years.

Friday's jobs and wage deal between General Motors and its German employees is a good example of what is happening in the German economy right now.
Employees agreed to nominal wage cuts and more working time flexibility. They will also forego pay increases until 2010 in some cases.
Wolfgang Munchau FT 7/3 2005

There are two reasons why German workers accept such deals. One is that unemployment has gone up. On a cyclically adjusted basis, the rate of unemployment now stands at 9.3 per cent of the working population, which is exactly two percentage points above the average rate in 2000, at the high point of the last economic cycle.

The second reason is that the labour market reforms of Gerhard Schröder, the chancellor, are beginning to work. Unemployment has not only become more probable. Welfare reform has also made it less attractive, especially for the long-term unemployed.

The critical question is: are we observing a one-off shift in real wages? Or is this going to be a drawn-out process that will depress consumption for the foreseeable future?

The bad news is that there are no signs that wage moderation is ending. Workers at Opel will be facing declining real incomes for the rest of this decade. The country's nominal wages are not yet falling, but last year they came close. The rise in per capita nominal wage costs - which had grown at annual rates of between 1 and 2 per cent during 1996 and 2003 - fell to zero per cent in 2004. As the Opel case suggests, there is much greater nominal wage flexibility in the German economy than is widely believed.

If the Opel pay deal catches on, a deflationary spiral could develop. As employees expect to earn less money in the future in real terms, they reduce their consumption patterns accordingly. This in turn could lead to lower investment, resulting in more wage moderation, a contracting economy and so on.

The appropriate policy response is for the central bank to remain open-minded. The German government should consider whether to increase public sector investment by a sum equal to 1 or 2 per cent of gross domestic product. Both education and transportation infrastructure have suffered from underinvestment in recent years.

Unfortunately, the policy response is going to be different. The European Central Bank said the next interest move would be upwards. The German debate on reforms focuses again on the labour market. Furthermore, the stability pact, the fiscal rules underpinning the euro, discourages large-scale investment programmes by any eurozone country.

In the absence of an appropriate policy response, it is more difficult than it should be to predict whether the German economy can escape the low-growth trap.

Germany has two histories: one that takes up most of the first half of the 20th century and one before 1900 and after 1945.
In the fourth century, German warriors controlled virtually every senior military post in the Roman army and ran the Roman empire in its last decades.
Steven Ozment Financial Times 4/3 2005

The writer is a professor of history at Harvard University and author of A Mighty Fortress: A New History of the German People (HarperCollins/Granta Books)

One problem is the "German disease" of a chronically stagnant economy. The combination of a 35-hour week, six weeks of annual leave, retirement at 55, social spending at 30 per cent of gross domestic product - all amid the world's highest wages and taxes - suggest self-indulgence unbefitting the world's third largest economy.

The numbers are not good: Germany has suffered four consecutive years of stagnation, 10 per cent unemployment and a continued lack of investment. But the straws in the wind are encouraging. Germany still accounts for a third of the European Union economy. Its business has learnt the art of the hostile takeover and how to downsize a company. Threatening outsourcing, industries bargain harder and unions agree to longer working weeks without increased compensation.

A second problem is the integration of Germany's 7.3m foreign residents, half of whom are Muslim and 70 per cent of those Turkish. The numbers are startling and some observers worry that secular Germans will find themselves at odds with devout Muslims who honour Islamic law over German constitutional law.

In the fourth century, German warriors controlled virtually every senior military post in the Roman army and ran the Roman empire in its last decades.

Who, in 1945, would have believed that a European Union with German wealth would be integrating eastern and western Europe at the turn of the century, or that Germany's foreign minister would be the champion of Turkey's admission into that Union? Today's pundits and political advisers who tell world leaders to count the Germans out only prepare them for unexpected surprises.

Riksbankschefen Lars Heikensten går till hårt angrepp mot EU-ländernas stabilitetspakt i en debattartikel i Financial Times.
"När pakten tvingar regeringar till smärtsamma konsolideringar som borde ha genomförts i goda tider - just när länderna är på väg att ta sig ur en recession - urholkas paktens trovärdighet", skriver han i artikeln.
DI 2/3 2005

The lack of action in prosperous times makes the pact pro-cyclical, causing it to amplify economic fluctuations. When the pact forces governments into painful consolidations that should have been implemented during booms- just when they are trying to drag their economies out of recession - its credibility is eroded.

What has been forgotten is that a well-balanced fiscal policy is not just necessary for the monetary union as a whole but is in the interests of the individual countries themselves.

Countries should embrace stability targets By Lars Heikensten Published: March 1 2005 20:25 click

German unemployment shot up to 5.2m last month, its highest level in 73 years, dragging Europe's largest economy deeper into its most serious political crisis in months.
Concern is now rising in the party that Berlin's apparent failure to tackle endemic unemployment could earn the SPD another electoral setback in North Rhine-Westphalia. Germany's most populous state, and an SPD stronghold, goes to the polls on May 22.
FT 1/3 2005

European Sado-Monetarism
"What could Europe do to protect itself in the face of a narrowing US deficit. The obvious answer would be to stimulate domestic demand by cutting interest rates and taxes. But...
Anatole Kaletsky of GaveKal research Cit by John Mauldin 25/2 2005

Förra året steg arbetslösheten i Portugal till 6,7 procent, lägre än EU-genomsnittet men bruttonationalprodukten växer knappast alls.
I och med euron kan vi inte heller längre snabbt lösa problemen för dagen med att ändra räntan eller valutan, säger doktor Teodora Cardoso, chefsekonom vid Banco Portugal.
Ekot 17/2 2005

Officiellt är arbetslösheten lägre än i många andra EU-länder men många portugiser misstänker att siffrorna är justerade och tycker att regeringen måste göra något åt den ineffektiva statsapparaten.

Stabilitetspakten på väg att bli svagare
Det råder enighet om att pakten inte har fungerat. Flertalet länder har inte "samlat i ladorna" tillräckligt under goda tider. Därför har många länder flera år i rad brutit mot underskottsförbudet. Tyskland och Frankrike är de grövsta syndarna.
Mats Hallgren 16/2 2005

Ett preliminärt förslag till reformer av EU:s stabilitetspakt ligger på bordet när de tolv euroländernas finansministrar träffas i Bryssel i kväll. Förslaget skulle leda till en försvagning av den överstatliga EU-kommissionens väktarroll och en uppluckring av paktens bindande "straffprocedur". Samtidigt skulle EU-länderna frivilligt åta sig att stärka sina offentliga finanser i goda tider och anstränga sig mer för att betala av på sina statsskulder.

There’s only one thing worse than blatantly disregarding this pact, as the Germans and French have repeatedly done almost since inception; that’s adhering to it.
The Euroland economies, therefore, risk finding themselves in a situation not unlike that of Argentina in the autumn of 2001: no policy tools readily at hand to deal with the problem of declining aggregate demand
Marshall Auerback 25/1 2005

There is also a supreme irony (not to say, schadenfreude) that the pact’s major offender is also its architect: in the planning phase of European Monetary Union, Germany was concerned that its long-term record of low inflation might be put at risk by Italian fiscal profligacy in a currency union. It was Germany, therefore, that drafted and imposed the stability and growth pact on all future eurozone participants.

Of course, it is very easy to talk about controlling national profligacy and exporting Germany’s “stability culture” to the rest of Europe during a period of solid growth, particularly when the author of such demands is the economic powerhouse of the continent (as was the case for Germany throughout much of the post World War II period, especially when the Stability Pact was being designed). Governments can easily retain balanced budgets in good times without unduly cutting spending on popular programs, given higher tax receipts and lower attendant social security costs.

But when an economy weakens, invariably income tax receipts decline, social welfare expenditures increase and budgets tend naturally toward deficit. In that context, a pact that puts too much weight on achieving fiscal savings in this kind of environment can risk exacerbating an economic downturn. The fact that fiscal policy may not be able to counteract short-term fluctuations in the simplistic neo-Keynesian manner advocated by policy makers in the 1960s does not mean that the fiscal stance should not be relaxed at all if aggregate demand is slumping badly, particularly if such slowing is caused by an increase in net private sector saving in response to a macroeconomic shock.

The 3 per cent limit itself is arbitrary. No good reason has been advanced for this figure, rather than, say, 2 per cent or 4 per cent, and it fails to address the issue of what governments ought to do if and when the private sector is clearly in retrenchment and no longer able to generate sufficient investment to underpin growth and employment.

EMU är fast växelkurs in absurdum. Om det går illa för Tyskland, vilket det nu gör, kan Tyskland inte ändra sin växelkurs, den ligger fast för alltid, eller åtminstone till EMU kraschar, vilket det kommer att göra. Det kommer att ske när dollarn faller och Europa drabbas av massarbetslöshet. Och så är det den förfärliga Stabilitetspakten. Den bygger på den i grunden felaktiga tanken att när det blir dåliga tider och statens skatteinkomster sjunker och utgifterna för arbetslösheten ökar, då skall staten skära ner på sina utgifter eller höja skatterna. Det är dårskap.
Rolf Englund i EU-krönika i NWT 2001-08-10

Because euro members have shed their power to pursue independent monetary and exchange-rate policies, they need more fiscal independence, not less.
The Economist 20/1 2005

What connects claims of unfair tax competition to rows over the stability pact is the notion that it is right for Brussels to interfere in national governments' decisions on taxes and spending. Yet this is a bad idea, on both political and economic grounds. Fiscal policy lies at the heart of democratic electoral politics, which is conducted at the level of nation-states. If an elected government wishes to cut taxes, boost spending or even run a bigger budget deficit, it is a travesty of democracy if the European Commission stops it.

Some argue that central rules are needed on economic grounds, to underpin the euro or to stop a race to the bottom in taxes. Actually, the opposite is true. Because euro members have shed their power to pursue independent monetary and exchange-rate policies, they need more fiscal independence, not less.

What, finally, about the worry that inspired the stability pact in the first place: the need to stop profligate euro members running up big deficits at others' expense? financial markets are quite able to exert discipline, even over euro members: witness the credit downgrade suffered by Italy last year. The only rule that is essential is a reaffirmation that neither the European Central Bank nor any other EU body will stand behind a national government's debt—so that if it gets into trouble, the pain will be felt at home, not abroad.

Stabilitets- och tillväxtpakten är död, men inte begraven.
I Europa råder ett oklart tillstånd, där gällande regler för EU-ländernas offentliga finanser inte åtföljs. I verkligheten gäller den starkes rätt, där de större länderna kan ta sig rättigheter som inte gäller för de mindre.
Johan Schück DN Ekonomi 22/1 2005Läs mer här

At no time were the countries of the European Union economically prepared to adopt a single European currency.
Yet political expediency accompanied by jealous anti-Americanism led 12 European countries to surrender national monetary policy without the necessary ingredients in place for an optimal currency area, especially labour mobility and fiscal equalisation.
Ironically, in the planning phase of this exercise Germany was concerned that its long-term record of low inflation might be put at risk by Italian fiscal profligacy in a currency union. It was Germany, therefore, that drafted and imposed the stability and growth pact on all future eurozone participants.
Uwe Bott, President, Cross-Border Finance, New York, Letters FT 20/1 2005

In adopting the pact, the eurozone governments then agreed additionally to yield fiscal policy, the only remaining instrument available to countries to ride out economic cycles within their borders. Consequently, electorates in many European slow-growth nations have become increasingly disenchanted with their governments, while national governments have grown increasingly helpless to counteract economic distress against a background of non-intervention at European government level. It goes without saying that all the whining about policy impotence is a mere deflection from Europe's unwillingness to adopt the necessary structural changes in order to become prosperous again. Still, the chancellor's proposal may be the first sign of an unravelling of the underlying fundamentals of the euro.

Gerhard Schröder has called for a loosening of the European Union's fiscal rules
In an article in Monday's Financial Times, Mr Schröder argues in favour of substantial exemptions to the EU stability pact that would also severely restrict the European Commission's latitude to intervene in the fiscal affairs of member states.
FT 16/1 2005

Gerhard Schröder, the German chancellor, has called for a loosening of the European Union's fiscal rules, an alteration that would allow Germany and other countries to run significant budget deficits. In an article in Monday's Financial Times, Mr Schröder argues in favour of substantial exemptions to the EU stability pact that would also severely restrict the European Commission's latitude to intervene in the fiscal affairs of member states. "The stability pact will work better if intervention by European institutions in the budgetary sovereignty of national parliaments is only permitted under very limited conditions," writes Mr Schröder. "Only if their competences are respected will the member states be willing to align their policies more consistently with the economic goals of the EU."

The article is the first concrete initiative by Mr Schröder in the debate about stability pact reforms, due to be agreed at the March EU economic summit in Brussels

A framework for a stable Europe
Reform of the European stability and growth pact is a key issue in European economic and financial affairs.
Gerhard Schröder FT 17/12005

Reform of the "excessive deficit procedure" will be the cornerstone. Strategies for reform must reflect the fact that it is not just a stability pact, but also a growth pact. Whether a fiscal policy is "right" and promotes stability and growth equally cannot be measured solely by compliance with the deficit reference value of 3 per cent of gross domestic product.

Macroeconomic criteria form a second group. Member states must be given sufficient leeway to provide cyclical incentives. At present a deficit of more than 3 per cent is only tolerated during a severe economic downturn. However, in the past few years we have experienced stagnation rather than anything worse. The mechanistic application of the pact has led the EU to recommend further restrictive measures, which have delayed recovery and thus put at risk long-term consolidation.

- Jag vet hur viktig stabilitetspakten är för mig som anhängare av en nationell finanspolitik men en europeisk penningpolitik.
Det som ska förena eld och vatten det är stabilitetspakten
EMU-beslutet större än EU-beslutet
Göran Persson i Europa-Posten nr 7/2002

The summit will also hope to agree reforms to the EU's stability and growth pact
FT 10/1 2005

Hans Eichel, finance minister, criticised the Bundesbank for refusing to help ease government financial problems by selling gold reserves.
Financial Times 21/12 2004

Mr Eichel told the Financial Times that the central bank's decision on Monday to sell only eight tonnes of gold in the next nine months was "very difficult to explain". Under an accord among 15 European central banks, the Bundesbank could have sold 120 tonnes by September 2005, a sale that would have brought government revenues of about €1bn, according to Mr Eichel.

Can the European Stability Pact survive?
The European Commission is giving up on its attempts to hold France and Germany to account for repeatedly breaching the financial rules
BBC 14/12 2004

France and Germany have been in breach of that limit since 2002. To some, the Commission's decision not to impose sanctions on the EU's two biggest economies is a sign that Brussels is admitting that the Pact is well and truly finished, ending the first chapter in the Commission's attempts to co-ordinate national economic policies across the European Union.

No-one wants to see eurozone countries start racking up large deficits as that would raise the cost of borrowing for all countries involved.

Weak demand in the eurozone baffles economists
Gross domestic product rose by just 0.3 per cent in the three months to September compared with the previous three months, as export growth slowed and household spending remained flat.
Financial Times 8/12 2004

There is even talk of recession. Joachim Fels, economist at Morgan Stanley, expects growth of 0.2 per cent in the first three months of 2005. "I would argue that the eurozone is flirting with recession," he says. "I would put the chances of a short recession in the first half of next year at about 40 per cent." The ECB now expects growth of about 1.9 per cent next year, little better than in 2004.

Michael Dicks, economist at Lehman Brothers, says that traditional economic models for forecasting consumer behaviour have broken down: they no longer explain why so much is being saved rather than spent. His explanation is that the eurozone - especially Germany - is suffering the short-term side effects of the push towards structural reforms by governments and restructuring by companies, both with the aim of boosting longer term labour flexibility and international competitiveness. Mr Dicks warns that the increase in "precautionary savings" by eurozone consumers "might become a permanent phenomenon if the authorities are seen reneging on the social contract and no longer deliver the sort of services that people have come to expect from the welfare state".

At the ECB, Mr Trichet's dilemma is twofold. First, his job is not, primarily, to boost growth in the eurozone or to help eurozone exporters. The mandate inherited from the Bundesbank, the German central bank on which the ECB is modelled, makes ensuring price stability its main task - although he can argue that price stability creates conditions for growth.

Second, it is far from clear that the ECB's governing council would accept that the euro's strength is a significant factor in the eurozone's malaise and that therefore a cut in interest rates was justified.

Grekland har presenterat för låga, felaktiga uppgifter om storleken på de grekiska budgetunderskotten de senaste åren
Ekot 22/9 2004

I själva verket har de grekiska budgetunderskotten varit så stora att landet i praktiken brutit mot reglerna i den så kallade stabilitetspakten flera år i rad.

De nya, korrekta siffror som nu presenteras visar att Grekland kanske inte ens uppfyllde de ekonomiska kraven som ställdes för att klara inträdesvillkoren för att bli medlem av den gemensamma valutan euron 2001.

Vad värre är: 2000, det vill säga året innan grekerna släpptes in i det gemensamma valutasamarbetet var budgetunderskottet 4,1 procent istället för 2 procent som grekerna uppgivit. Det visar att Grekland blev medlem av den gemensamma valutan utan att ha klarat inträdeskraven.

Jean-Claude Trichet, president of the European Central Bank, warned on Wednesday that any loosening of the European Union's rules on budgetary discipline would be “dangerous”.

Mr Trichet rejected in the strongest terms yet proposals by the European Commission to relax the stability and growth pact's rules on excessive budget deficits.

He described as “very dangerous” the Commission's proposal that eurozone governments could be given a flexible timetable for cutting big deficits according to national circumstances.

Mr Trichet also described as “dangerous” the Commission's suggestions that countries suffering low growth could use that as an excuse for running “excessive” deficits of over 3 per cent of gross domestic product.

The eurozone is a monetary federation without a federal budget. This unstable situation can evolve in two ways. One is implosion through political tensions between member states
Dominique Strauss-Kahn Financial Times 14/9 2004
The writer, a former French minister for the economy, finance and industry, is a member of the French parliament.

The eurozone is a monetary federation without a federal budget. This unstable situation can evolve in two ways. One is implosion through political tensions between member states. I would like to promote the other, which is the emergence of a common sense of what is in the eurozone's interest through stronger co-ordination of economic policies.

As long as the eurozone lacks a significant federal budget, it needs closer policy co-operation to achieve the desired fiscal stance.

First, in a monetary union, we need a mechanism to limit unsustainable policies that might lead the central bank to monetise public debt.

The greater focus on debt levels proposed by Mr Almunia shows that he recognises this danger. Some would argue that this debt should include implicit commitments to social policies, such as pension provision. But we must be consistent: I am not sure the level of unfunded commitments for public schemes is more important than the level of implicit debt for unfunded private funds.

In addition, focusing too narrowly on gross public debt might make people forget that a balance sheet also contains assets. As the UK knows well, a low level of public debt may entail poor public infrastructure.

The second improvement proposed by Mr Almunia is to take economic circumstances into account when assessing a member state's public finances. It has taken the Commission a long time to recognise this obvious idea. To consider an early warning for Germany in 2001, when the country was experiencing one of the worst downturns in recent decades, was not helpful. When public finances are assessed in the light of broader economic realities, most of the deterioration in fiscal balances turns out not to be due to discretionary policies.

Many of the so-called “small countries” are very attached to the eurozone's stability and growth pact rules as a way of keeping a lid on bigger countries' fiscal policies. It is worth listening to them. Fiscal expansion in a big country produces benefits for that country but can hurt smaller ones through the impact on the common interest rate set by the European Central Bank. On the other hand, Germany and France were right to complain that, during the last period of economic expansion, higher inflation in the smaller countries triggered higher interest rates for these two nations. This illustrates why, in a monetary union, policy co-ordination is vital to achieve a better economic outcome. In the long run, this will be achieved by a bigger federal budget.

Increasing the European Union budget above the absurd ceiling of 1 per cent of EU gross domestic product would not necessarily mean swelling European public spending. It is easy to see that some public expenditure should be transferred from national budgets to the EU level. Research and development, which could be much more efficiently run if it were centralised, is an obvious candidate.

Similarly, certain taxes, such as corporate income tax, could be moved from the national to the EU level. Such a tax would have all the properties needed for cyclical stabilisation.

While the EU develops its federal budget, we must rely on fiscal co-ordination of national policies.

For the past few years, the debate on the stability and growth pact has focused too much on control of national fiscal positions and not enough on economic policy co-ordination for the eurozone as a whole. It is time for a change.

Europe's finance ministers on Friday agreed to reform the discredited stability pact that underpins the euro.
But sharp differences remain over the extent to which the rules should be watered down
"There was no agreement, otherwise I would have mentioned it," said Gerrit Zalm, Dutch finance minister and chairman of the talks
Financial Times 10/9 2004

However, there was agreement that the eurozone needs stronger political leadership, and ministers appointed Jean-Claude Juncker, Luxembourg's prime minister, as a "Mr Euro" - the long-term finance minister for the euro. Mr Juncker, a moderate, will start his job in January 2005, and is likely to promote stability pact reforms to ease the pain of France and Germany, both struggling to comply with the 3 per cent deficit ceiling.

Bundesbank said that “instead of strengthening the stability and growth pact, the proposed changes would have a generally detrimental effect
Financial Times 8/9 2004

"the incentive to maintain a sound budgetary policy in the member states of the monetary union would be undermined and a false signal would be sent out to those countries which have not yet introduced the single currency.”

Bundesbank said: “Overshooting the 3 per cent deficit limit should continue to be allowed only in the exceptional cases specified in the stability and growth pact. The period for correcting excessive deficits should not be extended.”

Jürgen Stark, vice president of the Bundesbank, who played a lead role in drafting the statement, is regarded as an architect of the original pact from his time holding senior positions in the German finance ministry in the 1990s.

The European Central Bank said it was still “studying” the proposals before commenting in detail. But the Bundesbank's view is likely to be shared by others on the eurozone central bank's governing council. Guy Quaden, Belgian's central bank governor, also expressed misgivings on Tuesday. Jean-Claude Trichet, ECB president, has said he sees no reason to change the wording of the pact, but appears anxious to avoid a direct clash with the Commission.

Communication by the Commission on "Strengthening economic governance and clarifying the implementation of the Stability and Growth Pact"
The Commission considers that economic policy coordination should be strengthened through the more active use of the Broad Economic Policy Guidelines. Peer pressure and early warnings could be more actively used for surveillance within that framework.
EU website

The European Union’s stability pact was an awkward hybrid of law, economics and politics
It was born of an economic fear: that the fiscal indiscipline of some euro-area members would undermine the single currency for all.
It died an early, political death, when in November of last year the euro area’s finance ministers refused to punish their French and German colleagues for repeatedly running budget deficits in excess of 3% of GDP.
The Economist 6/9 2004

The single currency’s fiscal rules are meant to ensure that all members maintain sustainable public finances. But sustainability is a complex issue. The old pact tried, in effect, to reduce fiscal prudence to a single number (3%) for a single variable (the annual budget deficit).

The commission’s new proposals are more attentive to the economic cycle—both its upswings and downswings. They would oblige countries to tighten fiscal policy in good times, but allow them more leeway to loosen it in bad times. The commission used to argue, with some justification, that the 3% deficit ceiling gave governments plenty of room to spend their way out of recessions, provided they also saved their way through upswings.

Germany, for example, was asked to do too little during its last economic boom (four long years ago), and it is now being asked to do too much in the midst of economic stagnation.

The old pact was politically divisive. Some, such as Mr Prodi himself, thought it stupid. Some thought it sensible but not credible—it threatened countries with fines, but never followed through. Others complained that the threat of punishment was only credible for smaller countries, such as Portugal, not big powerful ones, such as France.

Romano Prodi, European Commission president, on Friday announced a loosening of the European Union's economic framework, claiming the move represented a “credible compromise between economic soundness and political realism”.

The reforms to the EU's stability and growth pact will help to defuse the escalating two-year crisis which has seen France and Germany repeatedly flout its deficit rules.

Thomas Mayer, European economist at Deutsche Bank, claimed the reforms sent the wrong signals about EU-wide rules and could further strain relations between member states. “If it leads to the notion that rules are not fixed but like jelly, then this would create a risk to economic and monetary union itself... even if it is a minimal risk, markets would worry.”

BBC: Under the proposals, eurozone countries would be allowed to run deficits above the current ceiling of 3% of GDP in the event of prolonged sluggish growth.

The change would accommodate eurozone governments which complain that the rules unfairly prevent them combating recession through higher spending.

EMU-beslutet större än EU-beslutet - Göran Persson i Europa-Posten nr 7/2002

- Jag vet hur viktig stabilitetspakten är för mig som anhängare av en nationell finanspolitik men en europeisk penningpolitik. Det som ska förena eld och vatten där är stabilitetspakten. Om den ska börja vattnas ur - då måste vi ju prata om det.
Läs mer här

On Friday, Joaquín Almunia, the European monetary affairs commissioner, is expected to unveil plans to inject some flexibility into the one-size-fits-all regulations that are designed to maintain economic stability in the 12 countries that use the euro.
International Herald Tribune 31/8 2004

A debate over how to revise the rules, known as the Stability and Growth Pact, has been gathering speed in Europe ever since the EU failed to sanction Germany and France, the two largest euro countries, for violating the agreement. The countries have allowed their deficits for several years to exceed levels set by the EU, sparking outrage in smaller countries like the Netherlands and Portugal, which implemented stringent fiscal measures soon after adopting the euro to ensure they would comply with the rules of membership.

Domen mot finansministrarna
Välkommen bakläxa
Thomas Gür SvD-ledare 14/7 2004

Europas finansministrar fick bakläxa av EU-domstolen för beslutet att stoppa kommissionens straffprocedur mot Tyskland och Frankrike för deras budgetförsyndelser. Domen är välkommen eftersom den innebär att gemensamt beslutade regler i det europeiska samarbetet inte kan kränkas godtyckligt av sittande regeringar, även om en majoritet i ministerrådet har gett sitt godkännande till kränkningen.

Germans are once again losing confidence in their economy; they long since lost it in their government
annual growth that has averaged just 0.3% for the past three years, around 4.3m unemployed, a budget deficit of almost 4% of GDP last year
The Economist 25/6 2004

“I waant to show them that soft growth, high unemployment and disinvestment are not facts to be fatalistically accepted,” Nicolas Sarkozy, France’s can-do finance minister, told the Financial Times in an interview published this week. “I believe in political will.” Mr Sarkozy was referring to the fatalism of the French, but his missionary faith in political willpower is needed still more in France’s moribund neighbour, Germany.

Its economic predicament—annual growth that has averaged just 0.3% for the past three years, around 4.3m unemployed, a budget deficit of almost 4% of GDP last year—is not incurable. But the German public are so weary of the remedies—and so disenchanted with the SPD government prescribing them (see chart)—they seem ready to resign themselves to the malady. Fatalism is the corollary of fatigue.

Mr Eichel’s new budget will do little to shake the pessimism. Since 2001, when the economy slowed and corporate-tax revenues plunged, Mr Eichel has struggled to stem the rising tide of red ink in the public finances. Each time he has tightened the budget, demand has been squeezed and deficits have only grown—wrecking the single currency’s fiscal rules and his own reputation alike.

The government’s failure to balance its books mirrors German households’ determination to balance theirs. The household savings ratio has remained stubbornly high, as Germans dwell on worries about their pensions and their jobs. Gerhard Schröder, the chancellor, had hoped that “Agenda 2010”, his package of reforms of welfare, pensions, health care and the labour market, would convince his public that he had taken things in hand. But Agenda 2010, far from inspiring confidence, has only sown insecurity. Talk of pension reform has focused people’s minds on how much more they will have to contribute—and how much less they will get out when they retire.

Mr Schröder’s labour reforms, though eminently sensible, have so far done more to push the jobless out of the labour force altogether than to put them into work. The unemployment total in April was 52,000 lower than a year ago—but only because of a change in the definition of who counts as unemployed, to exclude those taking aptitude-testing and training courses.

The European Commission is planning to alter the rules that govern budget deficits in eurozone member states
BBC 24/6 2004

Announcing a review of the Stability and Growth Pact, economic affairs commissioner Joaquin Almunia said the Commission had been "too stringent".

"The experience of the last five years has shown that in certain cases at least, the rules have perhaps been too stringent and have reduced our room for manoeuvre," he said.

It's the economy, stupid
Nobody will take continental Europe seriously so long as its core economies remain stagnant
Martin Wolf Financial Times 16/6 2004

Nor will the idea of integration lift the hearts of voters if it stands only for slow growth and high unemployment.

According to the OECD, potential GDP growth of the eurozone between 1997 and 2005 will run at 2.1 per cent a year.

Raising potential growth is not enough. The eurozone also needs to do something about the chronic weakness of demand. According to the OECD, the output gap - a measure of excess capacity - will be 3.3 per cent of potential GDP in Germany this year and 2.3 per cent in the eurozone as a whole, against just 0.3 per cent in the US and 0.1 per cent in the UK.

The first thing to do is avoid populist stupidities such as the national champion policies proposed by the opportunistic political dwarves who now run Germany and France.

Till och med moderaterna vill att det offentliga ska ha ett "överskott i det finansiella sparandet som motsvarar cirka 2 procent av BNP"
Många är oroliga över den offentliga sektorns ekonomi. Men ännu fler är oroliga över sin egen.
PJ Anders Linder SvD ledarsida 24/5 2004

Det är typiskt att det talas engagerat om behovet av ett överskottsmål för staten men inte för statens finansiärer. Till och med moderaterna vill att det offentliga ska ha ett "överskott i det finansiella sparandet som motsvarar cirka 2 procent av BNP", men vad har de för tankar om skattebetalarnas möjligheter till eget finansiellt sparande? Två procent av BNP låter lite, men det motsvarar 50 miljarder om året. Cirka 7 000 kronor per vuxen svensk.

SOU 2002:16, Stabiliseringspolitik i valutaunionen, slutbetänkande samt underlagsrapporter
Svenskt Näringsliv får härmed avge följande synpunkter på rubricerat betänkande.
Svenskt Näringsliv avstyrker det föreslagna finanspolitiska rådet. Det finns inget behov för ett sådant eftersom vi anser att aktiv stabiliseringspolitik inte skall bedrivas.
klicka här

It has never been clear whether the intention of the stability pact was to secure fiscal sustainability, to run an optimal fiscal policy for the eurozone as a whole or - as I always suspected - to dissuade some countries from joining the euro
Wolfgang Munchau Financial Times 24/5 2004

The French and German governments have put reform of the eurozone's fiscal rules back on the political agenda. They want a more flexible stability and growth pact. More flexibility sounds like a good idea at first. The trouble is that lack of flexibility was never the main problem of the pact. After all, Germany and France are on course for their fourth year of excessive deficits. What would they do if they had even more flexibility?

The real problem is lack of clear objectives combined with an unhealthy obsession with solving yesterday's problems. The inventors of the pact were haunted by memories of inflationary fiscal policies during the 1970s. Those who advocate reform today are under the spell of the recent economic downturn.

It has never been clear whether the intention of the pact was to secure fiscal sustainability, to run an optimal fiscal policy for the eurozone as a whole or - as I always suspected - to dissuade some countries from joining the euro.

Most countries at least try to comply with the rule to run deficits of less than 3 per cent of gross domestic product. Yet overall levels of debt have risen. How could this be? The problem is that the various fiscal targets set out in the Maastricht treaty may no longer be consistent with each other.

The treaty sets out the 3 per cent deficit rule. It also includes a reference value for a ratio of debt to gross domestic product of 60 per cent. For the two to be consistent, the eurozone requires a real growth rate of around 3 per cent. In the cases of Italy and Germany, the potential real growth rate is about 1.5 per cent. French potential growth may be only a little higher. At such low growth rates, the member states of the eurozone need to run a much lower deficit to ensure long-term sustainability of their public finances - more like 1.5 per cent or 2 per cent rather than 3 per cent.

Ireland, by contrast, which is growing much faster, can also afford to run significantly higher deficits.

At the moment, the fiscal policy stance of Germany and Italy - if left unchanged - would lead to insolvency at some point in the future. Flexibility - of the kind advocated by some of the eurozone's governments - will merely ensure that this moment will arrive sooner rather than later.

What is needed is more variability. Countries should not be treated the same. There are two intrinsic theoretical advantages of simple rules: transparency and enforceability. But neither applies to the 3 per cent deficit rule and the stability pact. The pact is no longer enforceable after EU finance ministers set a precedent by letting France and Germany off the hook last autumn despite their repeated failure to meet the 3 per cent target. Nor are its operational procedures transparent.

The problem with rule-based systems is fundamental. Alternative systems would not have made much difference to the eurozone's public finances. The German constitution, for example, requires the government to observe the so-called golden rule, which restricts deficits to fund public-sector investments. This rule, too, has failed to secure sustainability.

In the end, the only way to get to grips with unsustainable public finances is an approach based on qualitative assessments of the development of public-sector debt as opposed to hard and fast rules. Who would be in charge of making such assessments? It does not really matter whether the existing institutions retain their supervisory responsibilities or, as the authors of the study propose, one should set up a council of independent experts. What matters is recognition that without a strategy for higher economic growth, the eurozone is certain to breach even the most flexible fiscal policy rule.

Stability and Growth in Europe: Towards a Better Pact;
Antonio Fatás, Jürgen von Hagen, Andrew Hughes Hallett, Rolf Strauch, Anne Sibert; CEPR, 2003

The finance ministers of Britain, France and Germany are joining forces to call for reinterpretation of the eurozone's stability and growth pact
Financial Times 21/5 2004

The finance ministers of Britain, France and Germany are joining forces to call for reinterpretation of the eurozone's stability and growth pact, saying it should take account of individual cyclical and structural conditions in each member state.

In an article in Friday's Financial Times, Gordon Brown, Nicolas Sarkozy and Hans Eichel call for the pact to take account of factors such as debt levels and the need to improve public finances. After the failure last year of enforcement mechanisms against countries breaching its rules, the pact has been in limbo pending a possible overhaul next year. In what could be seen as a sign of a new and concerted approach to economic policymaking ahead of this weekend's meeting of finance ministers from the group of eight leading industrial nations, the three men are also insisting that the European Union's national governments must keep control of fiscal policy.

Göran Persson: Sverige går bara med i "fungerande" EMU
Reuters, 2002-08-06
Sverige kommer bara att gå med i EMU och övergå till euron om stabilitetspakten garanterat gäller samtliga medlemsländer. Det sade statminister Göran Persson på tisdagen. "Om vi hamnar i en situation med budgetanarki inom EU, med ökande budgetunderskott kommer EMU inte att fungera", sade han och hänvisade till rapporter om hur andra EU-länder kan komma att följa Portugal och överskrida stabilitetspaktens gräns på 3 procent av BNP. "Vi kommer att gå med i EMU om vi har en stabilitetspakt och ett system som fungerar, och jag utgår från att det kommer att bli så. Allt annat vore en sensation", sade Persson.

- Jag vill inte ha en federativ utveckling. Svenska folket har inte gått med i en federation. EMU kan mycket väl komma att kräva en europeisk finanspolitik. En sådan är inte möjlig att utveckla, om den ska vara kraftfull, utan att man också bygger upp europeiska, gemensamma politiska organ. Då växer det federativa inslaget i EU fram. Den diskussionen är det centrala i EMU- sammanhanget.
Göran Persson i Veckans Affärer 1997-10-20

Gordon Brown, Hans Eichel och Nicolas Sarkozy pläderar för att vi ska tolka EMU annorlunda. Det är lite oklart hur det ska ske. Viktiga moment av det som de stora länderna nu inte klarar är inskrivet i själva fördragstexten. Ska man ändra det måste EMU byggas om från början.
Barometern 22/5 2004

OECD: Germany and three other EU countries will again break eurozone deficit rules next year
France, Italy and Portugal
BBC 19/4 2004

Germany, Europe's largest economy, will break the rules for the fourth year running with a deficit of 3.2% of GDP. Worse still will be France with 3.5%. Italy and Portugal will also breach the 3% maximum rule. Germany is set to grow 1.2% next year down from 1.4% in earlier predictions.

The European Commission announces that six countries have either breached, or are likely to breach, the EU's fiscal rules.
Britain, Greece, the Netherlands and Italy will join France and Germany in the dock for allowing their budget deficits to encroach on the stability and growth pact's ceiling of 3 per cent.
Financial Times 6/4 2004

The European Commission is expected this week to issue an early warning to
Italy and the Netherlands for breaking the rules underpinning the euro
EU Observer 5/4 2004

In its present form the stability and growth pact is unworkable, and also bad for our economies.
Loukas Tsoukalis Financial Times March 29 2004
The writer is president of the Hellenic Foundation for European and Foreign Policy (ELIAMEP), and author of What Kind of Europe? (Oxford University Press, 2003)

The architects of economic and monetary union devised rigid rules as a poor substitute for the kind of collective discretion that our common institutions are apparently not yet ready to deliver. While we are waiting for this to happen, we should go for more flexible and sophisticated rules, instead of simply ignoring the existing ones.

With a budget deficit of 3.2 per cent Britain is in no position to lecture anybody
The decision to join an economic and monetary union is profoundly, if not exclusively, political
Wolfgang Munchau, Financial Times, March 18 2004

A joint letter signed by the leaders of Spain, the Netherlands, Italy, Portugal, Poland and Estonia has called for the the Stability and Growth Pact rules to be maintained
They received backing from the President of the ECB, Jean-Claude Trichet
EU Observer 16/2 2004

A joint letter signed by the leaders of Spain, the Netherlands, Italy, Portugal, Poland and Estonia has called for the rules underpinning the euro to be maintained. The letter may reopen old wounds over this issue, as some countries are in favour of reforming the rules - known in EU jargon as the Stability and Growth Pact.

The leaders write, "The Stability and Growth Pact is an essential element of economic governance in Economic and Monetary Union and a necessary condition to sustained economic growth that we all pursue, and its rules must be applied consistently and in a non-discriminatory basis".

They received backing this afternoon from the President of the ECB, Jean-Claude Trichet. Speaking before the Economics and Monetary Affairs Committee of the European Parliament today, Mr Trichet said, "The ECB does not see a need to change the treaty as it considers the pact appropriate in its present form", adding that he had a "deep feeling" that the pact was "fundamental" to the euro.

Let us suppose that the commission loses its case. That will mean that the stability pact is proved to be a farce. And what if the commission wins?
Boris Johnson, MP for Henley and editor of The Spectator
Daily, Telegraph 15/1 2004

The 15 judges of Europe's supreme court will break off from their arbitrations in matters such as the French desire to shoot ortolans out of season or the pension rights of transvestite spouses. They will decide a question of momentous importance for the governance of the Continent: who is in charge of the euro - national governments or the federal institutions in Brussels?

Summoning up all his courage, Romano Prodi, president of the European Commission, has decided to vindicate the European stability and growth pact. You will remember that this stipulates that euro zone countries may not run budget deficits of more than three per cent; and that France and Germany recently decided to flout this rule, on what some might say were the wholly reasonable grounds that they have huge unemployment, stagnant economies, and could do with fiscal stimulus. All 15 countries are in the dock for either breaching the rules, or for complicity in the dereliction of France and Germany.

Let us suppose that the commission loses its case, after the lawyers have spent enough time browsing and sluicing in Luxembourg. That will mean that the stability pact is proved to be a farce. Governments will be able to run whatever deficits they like, and spendthrift governments will be able to free-ride upon the thrifty.

And what if the commission wins? In a way, that outcome is even worse. It means that Brussels will be allowed to punish the naughty countries by imposing "pecuniary sanctions" - that is, fines of 0.5 per cent of GDP.

You've got it: the penalty for running an excessive budget deficit is to have your deficit increased by Brussels! It is a piling of Pelion upon Ossa, a pointless infinite regress, and it is not at all clear how it is supposed to work, or how the fine will be collected, or whether the fine will be increased when the fine has been collected in punishment for the increase in the deficit.

And quite apart from the economic barminess, what is the political meaning of this action by the commission? It means that the Eurocrats in Brussels have not only gone against the opinions of the markets and most economists, who thought, on the whole, that breach of the stability pact rules was right for the French and German economies.

America’s fiscal policy is dangerous, says the IMF.
Europe’s is illegal, say the bureaucrats in Brussels
The Economist 14/1 2004

The commission’s complaint is procedural, not economic. It does not want to haggle with the ministers over whether France should cut its deficit by 1% or 0.8%. It concedes that the ministers can amend its fiscal prescriptions. But it has two gripes about the way they have done it.

First, whatever finance ministers eventually do decide, it has to be legally binding: there is nothing in the treaty that allows them to come to non-binding, gentlemen’s agreements with countries in the dock.

Second, there is nothing in the treaty that allows finance ministers to suspend the pact’s punishment proceedings as and when they see fit.

Kommissionens beslut är välkommet. Avtal är till för att hållas.
”Idiotisk”. Så sammanfattade EU-kommissionens ordförande Romano Prodi sin uppfattning om stabilitetspakten, en av EMU:s grundbultar. Nu har kommissionen bestämt sig för att dra ministerrådet inför EG-domstolen
SvD-ledare 15/1 2004

”Idiotisk”. Så sammanfattade EU-kommissionens ordförande Romano Prodi sin uppfattning om stabilitetspakten, en av EMU:s grundbultar. Nu har kommissionen – med Prodi som en ivrig tillskyndare – bestämt sig för att dra ministerrådet inför EG-domstolen för att finansministrarna i höstas inte följde paktens ”idiotiska” regler. Pikant. Men rätt.

Kommissionens beslut är välkommet. Avtal är till för att hållas. Att se mellan fingrarna med Frankrikes och Tysklands upprepade och flagranta nonchalans inför ett regelverk som staterna själva bundit sig vid, hade varit en uppmaning till en legal låt gå-anda.

Det hade också visat att i EU kan de stora elefanterna dansa i egen takt; även det med en negativ prejudicerande verkan.

Beslutet att gå till domstolen visar vilken viktig roll som kommissionen fullgör som fördragens väktare – och därmed de små staternas bäste vän.

I själva verket var det en nödvändighet att gå till domstolen för att hävda kommissionens alltmer försvagade auktoritet inom EU. Att maktkampen lär producera en ökad mängd dåligt humör understryker vikten av att förhandlingarna om EU:s konstitution skjuts fram. Till oklarheterna hör ju också att de fransk-tyska anspråken på att leda EU genom en inre kärna bör ha skjutits i sank.

Utgången är inte given av EG-domstolens prövning av det som kan föra tankarna till en konflikt mellan rättsstatens och politikens principer. EU-lösningen är att domstolen ger ministerrådet en skrapa medan kommissionen lägger förslag om att ändra pakten i syfte att tillåta en större statsfinansiell lössläppthet.

EU-kommissionens beslut att dra unionens finansministrar inför domstol splittrar EU
Många medlemsländer kritiserar kommissionen, liksom Europafacket och småföretagarna
DN 15/1 2004

Charlie McCreevy, finansminister i EU:s ordförandeland Irland, sade i en radiointervju att han talar för medlemsländernas flertal när han uttrycker sin besvikelse:
- Jag som politiker hade föredragit om kommissionen inte hade vidtagit den här speciella åtgärden.

Kommissionen begär att EU:s domstol ska avgöra om finansministrarnas majoritet handlade lagligt när de beslöt att lägga sanktionsproceduren mot budgetsyndarna Frankrike och Tyskland på is och nöja sig med att de båda länderna lovade att klara EU:s underskottsregler nästa år.

Vart tog EU-viljan vägen
Det är stabilitetspakten och författningen det handlar om, de är de synliga, omedelbara problemen men den underliggande, oroande frågan gäller den politiska viljan
DN-ledare 15/1 2004

Som Bertie Ahern uttryckte det inför EU-parlamentet: "Ska vi nå de nödvändiga kompromisserna krävs en tillräcklig, kollektiv politisk vilja".

Den brast på senhösten, tydligast när toppmötet om författningen sprack men också stabilitetspaktens haveri är ett utslag av bristande politisk vilja. Tongivande EU-medlemmar som Frankrike och Tyskland har satt den egna nationella dagordningen främst och kallsinnigt struntat i EU-förpliktelserna.

Inför det nya, större EU tycks medlemmarna tveka. I stället för tilltro till systemet och den gemensamma viljan har de börjat gardera sig - det gäller att försäkra sig mot risken att bli överröstad. Hellre blockerande minoriteter än beslutande majoriteter.

Stabilitetspakten har redan spruckit och kommissionen har redan lidit nederlag. En vinst i domstolen kommer inte att ändra detta. I stället kommer en process att än en gång visa att de två stora länderna nonchalerar pakten och dess övervakare, kommissionen.

Pakten behöver återupprättas men i ändrat skick. Det kan bara ske om den politiska viljan återvänder.

Men där finns fler stenar på vägen. EU:s budget ska bantas tycker de länder som bidrar med mer än de får tillbaka. Sverige hör till dem och skrev tillsammans med England, Frankrike, Holland, Tyskland, och Österrike ett brev i saken till EU-kommissionen strax före jul. Budgetbantning just nu när EU ska få tio nya, förhållandevis fattiga, medlemmar är knappast ett uttryck för gemenskapsanda.

Romano Prodi har inte varit en alltigenom lyckad kommissionsordförande. Så långt sträcker sig enigheten bland dem som ska utse hans efterträdare, men det betyder inte att de kommer att ha lätt att utse en ny ordförande. Och framför allt betyder det inte att de vill ha en som kommer att bli mer framgångsrik. Kvinnan eller mannen ska dock vara framvaskad till toppmötet i juni, våren lär därför komma att bjuda en ryktesspridning och en kohandel av ett slag som inte gör EU attraktivare i medborgarnas ögon.

Utgångsläget för Bertie Ahern är alltså inte det ljusaste. I åtskilliga frågor delar sig medlemmarna i olika läger. Kommissionen står inför sitt avtåg, euron är för stark och den ekonomiska tillväxten för svag och misstron mellan nya och gamla medlemmar gror.

The row between the European Commission, and France and Germany over budgetary rules is about who holds what power - just as most political rows are.
BBC 13/1 2004

But in its nature and in its potential significance, this is unprecedented. France and Germany - the two big boys inside the single currency - are on course to break for the third year in a row the rules governing how they balance their books. Under the rules of engagement for the euro - rules set out in eye-straining detail in the Stability and Growth Pact - repeated bad behaviour means a stiff course in fiscal discipline from the Commission - the officials who help run the European Union.

Storslagna mål parade med en vilja att lägga livet till rätta på områden där nationell mångfald berikar har adderats till EU:s ambitioner att öppna marknaderna. Samtidigt som EU ska göra mer blir rötangreppen från snäva nationella intressen allt allvarligare, t ex nonchalansen mot stabilitetspakten. Därför är det bra att det sistnämnda regelbrottet nu förs vidare till EU-domstolen.

The European Commission today decided to launch unprecedented legal action against member states over their effective suspension of the euro rules last November
EU Observer 13/1 2004

Announcing the decision to journalists during the European Parliament's session in Strasbourg, the spokesman for Economic and Monetary Affairs Commissioner Pedro Solbes said that the controversial move was made after a "long and comprehensive debate". There was no vote on the issue, as some had expected, although the spokesman confirmed "this does not mean that there was unanimity".

The Commission will now ask the European Court of Justice to rule on a procedure taken by finance ministers last November to avoid disciplinary action being taken against France and Germany for their persistent breaking of the rules underpinning the euro.

Brussels believes the procedure was "not appropriate" and has received legal advice confirming this. The spokesman also confirmed that the Court would be asked to "fast-track" the case, which would mean the issue is resolved in 3 to 6 months rather than one or two years. But it is up to the court to decide whether to grant this.

Reglerna i EU:s tillväxt- och stabilitetspakt kommer i andra hand för Storbritannien.
I första hand kommer de inhemska ekonomiska mål som den brittiska regering satt upp.
budgetunderskottet beräknas till 3,4 procent i år
Finansminister Gordon Brown, (Direkt) 2003-12-11

Reglerna i EU:s tillväxt- och stabilitetspakt kommer i andra hand för Storbritannien. I första hand kommer de inhemska ekonomiska mål som den brittiska regering satt upp. Det sade finansminister Gordon Brown i en intervju med BBC Radio 4 skriver AFX. I tisdagens rapport inför budgeten annonserade Gordon Brown att budgetunderskottet beräknas till 3,4 procent i år, vilket är ett större underskott än vad stabilitetspakten tillåter.

"Vi har råd med våra underskott på ett sätt som jag rapporterade till Europeiska Unionen igår, och jag har väldigt tydligt sagt till dem att om valet står mellan tillväxt- och stabilitetspakten och vad som är bäst för Storbritannien, väljer jag det som är rätt och bra för Storbritannien", sade finansministern.

Brittiska regeringstalesmän sade också på onsdagen att Storbritannien har råd med en ökad upplåning eftersom landet har en låg skuldsättning relativt andra länder. Skuldsättningen ligger också med god marginal under nivån på 40 procent av BNP, som är den gräns som landet självt beslutat om.

"The failure to respect the rules and procedures foreseen in the stability and growth pact risks undermining the credibility of the institutional framework, and confidence in sustainability of public finances across the euro area"
ECB President Mr Trichet, giving evidence at the European parliament
Financial Times 2/12 2003

Mr Trichet, giving evidence at the European parliament, repeated his warning of the "serious dangers" of the suspension of the pact, which attempts to restrict government deficits to 3 per cent of gross domestic product.

"I don't think the spirit or the letter of the pact should be amended," he said.

But Germany, which engineered the suspension of the pact last week, said the single currency interest rates set by the ECB were hurting its economy. Hans Eichel, German finance minister, speaking in Frankfurt, said: "Its [the ECB's] monetary policy leads to Germany having the highest real interest rates in the eurozone, which is not enhancing growth."

Kommentar av Rolf Englund:
Detta är ett inbyggt systemfel i EMU:s konstruktion. Den förste i världen som formulerat detta i tryck var Stefan de Vylder, i sin artikel "EMU bäddar för bråk", Göteborgs-Posten 2002-10-22.

One could be forgiven for wondering whether the EU itself is unravelling. But the collapse of the stability pact should give Europe's leaders pause for thought before they rush into an agreement on a new constitutional treaty at their next summit, scheduled for December 12-13.
Wolfgang Munchau, Financial Times, 1/12 2003

Det var som upplagt för en intensiv och grundlig eftervalsdebatt. Men den har inte infunnit sig. Jasägare, som för bara några månader sedan såg euron som en ödesfråga, rycker liksom på axlarna: Shit happens...
Stabilitetspakten har brister. Det kanske inte är alldeles fel att Sverige, i gott sällskap med Storbritannien, håller litet distans till en europeisk union, där alla är jämlika, men somliga mer jämlika än andra.
Per T Ohlsson, Sydsvenskan 30/11 2003

By flouting the budgetary disciplines of the European Union's stability pact, the German and French finance ministers have driven a steamroller over the rulebook that lays out the economic governance of Europe's single currency.
Financial Times 28/11 2003

Mr Eichel, once a fierce guardian of the German finances, finds himself in a much more uncomfortable position than his French counterpart. He has now violated a postwar German taboo: the sanctity of fiscal orthodoxy. A collapse in tax revenues and rocketing unemployment left him with a ?43.4bn ($51.6bn) shortfall in the federal budget for 2003, branding him as the man who has presided over the biggest deficit in German history.

"He's actually too nice," says a close adviser. "I have heard him shout exactly three times in three years." One was in Brussels on Monday, when Romano Prodi, the Commission's president, and Pedro Solbes, monetary affairs commissioner, cornered Mr Eichel in an office of the Justus Lipsius building and urged him to drop his stance on the stability pact: the explosion could be heard outside the room.

European countries should strike out Article III-76 paragraph 2(a) from the draft constitutional treaty, which reaffirms the 3 per cent deficit limit.
There is no point writing rules that countries have no intention of keeping to.
Financial Times editorial 27/11 2003

First, bond markets have rarely provided effective discipline against fiscal profligacy. The tiny gap in price between Italian and German bonds, for example, fails to reflect real differences in risk of default.
The yield on Japanese 10-year bonds is only 1.25 per cent, even though everyone knows the country's public finances are perilously weak.

Second, when bond markets at last wake up to a country's unsustainable debt position, the outcome is invariably ugly. The governments of the eurozone are right to strive to use rules to prevent such a scenario.

Third, even in good times the single interest rate in a monetary union gives members an incentive to take a free ride by operating a weaker fiscal position than their partners. Rules are therefore necessary. But they must make economic sense and governments must want to comply.

A new set of limits should take account of debt levels, future pension liabilities and the cyclical position of European economies. To show political commitment to sticking to the new rules after breaking the old set, countries should consider enacting domestic legislation along the same lines. That is for the longer term.

To get there, European countries should strike out Article III-76 paragraph 2(a) from the draft constitutional treaty, which reaffirms the 3 per cent deficit limit. There is no point writing rules that countries have no intention of keeping to. Instead, the treaty should contain a commitment that member states will produce a new definition of an excessive deficit in due course, while keeping the backstop commitment under Article III-76 paragraph 2(b) to limit government debt.

The stability and growth pact is dead. This is bad for those who believe that pacts and treaties should be respected.
But its death also shows that agreements should be intelligent and clearly in the national interest. This was not the case with the stability and growth pact.
Paul de Grauwe, Financial Times 27/11 2003

The writer is a professor of international economics at the University of Leuven

The pact identified an important problem: unsustainable government debt levels can lead to debt crises, which are especially damaging in a monetary union. Three countries - Belgium, Italy and Greece, with debt ratios exceeding 100 per cent of gross domestic product - came close to unsustainable debt levels. For these countries it made sense to use drastic medicine aimed at reducing debt levels.

The pact was unintelligent for another reason. Modern nations have a lot of responsibilities to their citizens. These responsibilities are stretched during a recession, when citizens expect the social insurance mechanisms to function. The rigidity of the pact was blind to this.

If nothing is done and the pact remains unchanged, it will be very bad for Europe. The pact will inevitably be reinvoked, leading to new fights and recriminations.

What should such a new pact look like? First, since countries have very different debt levels, each should be treated differently. This means that countries whose debt exceeds more than 100 per cent of GDP should follow different budgetary policy rules from countries with sustainable debt levels.

Second, the pact should have more flexibility. A rule that requires countries to lower their social security responsibilities during recessions will not last. This is all the more so because, in a monetary union, governments have lost an instrument of policy, namely the monetary instrument.

Parallels between the American boom of the second half of the 1990s and the present European recession. In both cases, policymakers decided that the economic conditions they observed were driven by structural factors.
Paul de Grauwe, Financial Times, August 7 2003

EMU är fast växelkurs in absurdum. Om det går illa för Tyskland, vilket det nu gör, kan Tyskland inte ändra sin växelkurs, den ligger fast för alltid, eller åtminstone till EMU kraschar, vilket det kommer att göra. Det kommer att ske när dollarn faller och Europa drabbas av massarbetslöshet. Och så är det den förfärliga Stabilitetspakten. Den bygger på den i grunden felaktiga tanken att när det blir dåliga tider och statens skatteinkomster sjunker och utgifterna för arbetslösheten ökar, då skall staten skära ner på sina utgifter eller höja skatterna. Det är dårskap.
Rolf Englund i EU-krönika i NWT 2001-08-10

Såväl Tyskland som Frankrike bryter sedan flera år mot paktens regler om ett budgetunderskott på högst 3 procent av BNP.
Om medlemsländer börjar följa EU:s regler endast i den mån det passar deras inhemska syften kan hela Europaprojektet komma i gungning
Sydsvenskan 25/11 2003

Såväl Tyskland som Frankrike bryter sedan flera år mot paktens regler om ett budgetunderskott på högst 3 procent av BNP. Men när det blir tal om sanktioner protesterar de båda länderna högljutt. Visst gehör har de också fått: EU-kommissionen vill ge Tyskland och Frankrike mer tid att reda ut sina budgetproblem genom att föreslå krav på besparingar istället för böter. Det är dessa krav finansministrarna skall ta ställning till i Bryssel.

Stabilitetspaktens regler för medlemsländernas statsfinanser är mer än bara en prestigesak. I grunden handlar det om förtroendet för euron och i förlängningen för hela den europeiska ekonomin. Därför måste reglerna följas.

Nonchalansen är mycket beklaglig - särskilt med tanke på vad som hotar om principlösheten sätts i system. Om medlemsländer börjar följa EU:s regler endast i den mån det passar deras inhemska syften kan hela Europaprojektet komma i gungning.

France and Germany have escaped punishment under the stability pact for their big budget deficits. The pact itself may not escape a long-awaited demise
The Economist 25/11 2003

Now that the pact’s legal procedures have run their course, its architects will have to think again about the economics of the euro and its fiscal rules. The economic flaws of the pact are, by now, painfully obvious and depressingly familiar: its parameters, such as the 3% deficit limit, are arbitrary and its procedures, extracting budget cuts or fines even in a recession, are counter-productive.

The 3% limit pays no attention to the nominal growth rate of the economy, nor to a government’s stock of liabilities or assets. Despite its toothlessness, it has already wreaked some damage on European fiscal planning. Italy regularly sells off another piece of government silverware to disguise its budget problems. The Germans are having difficulty passing a much-needed tax cut because of fears that it will add to the country’s fiscal woes.

Europe's stability and growth pact consists of a series of inoperable enforcement procedures and of questionable budgetary rules. It is a rotten legal document.
But when confronted with a foul law, the right course of action is to change it - not to break it.
Financial Times editorial 26/11 2003

Europe's finance ministers chose to break the law, if not in letter then in intent, when they voted yesterday against taking disciplinary action against France and Germany for persistent breach of the European Union's deficit rules. The vote will have serious repercussions. The stability pact is in effect finished.

It is inconceivable that finance ministers will ever find a majority to impose sanctions on anybody after having let France and Germany off the hook. The EU now finds itself in the same position it would have been in if the pact had never been agreed.

The dispute over the stability pact will doubtless now become part of the debate over Europe's future constitution. As Didier Reynders, Belgium's finance minister, pointed out, the worst time to break an existing treaty is when you are negotiating a new one. Since the damage has already been done, the best course of action now would be to reform the pact itself, introducing flexible and sensible rules combined with a credible enforcement procedure.

Europe's political leaders have a small but rapidly closing window of opportunity to fix the pact before adopting the new constitution. They were previously afraid that opening this can of worms would jeopardise the treaty. But maintaining the status quo is no longer a viable alternative. The EU and the eurozone have both lost credibility as a result of yesterday's fiasco. A new policy framework is urgently needed.

One option, then, is to leave the policing of government deficits and the pricing of government debt to the markets. Under euro rules, the debt of member governments remains their responsibility and theirs alone. The European Central Bank (ECB) is prohibited from bailing out member governments by printing money to pay off their debts. But would that prohibition, if tested, fare any better than the stability pact’s prohibition on deficits of more than 3%? The ECB is certainly better shielded from political pressures than the stability pact is. But if this week has any lesson, it is that anything Europe’s big governments have stitched together, Europe’s big governments can unpick.

EU:s stabilitetspakt är död, även om den fortfarande finns kvar på papperet. Även respekten för det grundläggande EU-fördraget har skadats.
Mats Hallgren, SvD Näringsliv 26/11 2003

Pakten har dödförklarats många gånger tidigare men överlevt. Så lär också denna gång bli fallet.
SvD-ledare 26/11 2003

Tyskland tog hem spelet med hjälp av en koalition av syndare. Frankrike, som tidigare har visat prov på samma översitteri från ett kvarsittarland, gav sitt stöd. Italien, som också har problem med obalanser i de offentliga finanserna, hamnade förstås på samma dåliga sida. Är gårdagens politiska bortdribbling av kommissionen dödsstöten för stabilitetspakten? Nej. Pakten har dödförklarats många gånger tidigare men överlevt. Så lär också denna gång bli fallet.

Huruvida beslutet innebär slutet för stabilitetspakten eller inte är närmast en teknisk fråga, politiskt är paktens regler övergivna.
När Tyskland som drev fram pakten, inte självt förmår hålla den, var finns då dess politiska fundament?
Efter 500 procents ränta förstår de flesta att något drastiskt måste göras
DN-ledare 26/11 2003

Det verkligt bekymmersamma är att två av EU:s tunga kärnländer hellre vill sopa problemen under mattan än göra ett allvarligt försök att komma till rätta med EU:s ekonomiska huvudproblem - den dåliga tillväxten. Visserligen gör både Frankrike och Tyskland en del för att reformera sina välfärdssystem men det är trots allt mycket måttliga åtgärder. Och framförallt - budgetbesparingar i sig får inte fart på ekonomin.

Både Frankrike ochTyskland har svårt att lämna en politik med betydande statlig kontroll och inblandning. I Frankrike gäller det till exempel energin, i Tyskland till exempel bank- och finanssektorn. Lägg därtill den starka ställning som de offentliganställda har i Frankrike och som gör att varje regering kan stupa på strejk-aktioner från dem, och den kontroll som fackföreningar har över den tyska politiken.

Budgetbalans är i och för sig ett gott värde, men det är ingenting som någon vill uppoffra något för. Så var det också i Sverige tills 1990-talskrisen slog till. Efter 500 procents ränta förstår de flesta att något drastiskt måste göras. Dit är det långt i EU:s stora ekonomier. Det är den verkliga svagheten i euroland, inte att stabilitetspakten gått sönder.

– Det är slutet på EU:s stabilitets- och tillväxtpakt, och det är en svart dag för Europa, för euron och jag hoppades att finansminister Hans Eichel inte hade gjort det han nu gjorde, körde över de små medlemsländerna, säger största oppositionspartiet kristdemokraternas skatteexpert Friedrich Merz.
Ekot 25/11 2003

Nu hotar en inrikespolitisk kris. Oppositionen kommer att stoppa regeringens skattereform som skulle sänka skatterna med runt 150 miljarder kronor nästa år.

Euroländernas finansministrar nådde tidigt på tisdagsmorgonen en kompromiss som kan avvärja den hotande krisen kring Tysklands och Frankrikes budgetunderskott.
- Kommissionen beklagar djupt uppgörelsen, som vi anser strider mot EU-fördraget och stabilitetspakten, sade Solbes.
DN 25/11 2003

Euroländernas finansministrar nådde tidigt på tisdagsmorgonen en kompromiss som kan avvärja den hotande krisen kring Tysklands och Frankrikes budgetunderskott. Men EU-kommissionen protesterar. Underskotten överstiger treprocentsgränsen i EU:s stabilitetspakt och de båda länderna hotades därför av böter. Enligt uppgörelsen slipper de tills vidare påföljd, men manas i ett gemensamt uttalande att genomföra besparingar för att minska underskottet i statsbudgeten.

Uppgörelsen presenterades av Italiens finansminister Giulio Tremonti, som lett den nio timmar långa nattmanglingen i Bryssel. Tremonti hävdade att uppgörelsen är i linje med stabilitetspakten, men ekonomikommissionär Pedro Solbes var vid morgonens presskonferens märkbart arg. Han hotade med att ärendet kan gå vidare till EG:s domstol, rapporterar Ritzaus korrespondent. - Kommissionen beklagar djupt uppgörelsen, som vi anser strider mot EU-fördraget och stabilitetspakten, sade Solbes.

- Jag vet hur viktig stabilitetspakten är för mig som anhängare av en nationell finanspolitik men en europeisk penningpolitik. Det som ska förena eld och vatten där är stabilitetspakten. Om den ska börja vattnas ur - då måste vi ju prata om det.
Göran Persson i Europa-Posten nr 7/2002

My contention is that to move from trade bloc Europe to global Europe, we must explicitly reject old flawed assumptions that a single market should lead inexorably to tax harmonisation, fiscal federalism and then a federal state. Indeed it is by Britain standing up resolutely for British ideas whose time has come – our commitment to long-term fiscal rules, flexibility, openness and free trade – that we not only secure British interests but equip Europe for global competition.

German plan could be end of stability pact
The death notices of the European Union's stability and growth pact have been written many times. But on Tuesday in Brussels, Germany came forward with a plan which some claim would drive a final stake through its heart.
Financial Times 5/11 2003

Germany, which drew up the EU's fiscal framework in the 1990s, is trying to redefine the once-feared pact in a way that would be unrecognisable to its authors in the Bundesbank.

Hans Eichel, Germany's foreign minister, proposed that countries that "co-operated" in trying to cut their deficits, regardless of their success, should be exempt from the pact's sanctions mechanism. He wants this liberal interpretation to be applied to France and Germany, both of which will break the pact's 3 per cent deficit limit for the third year in a row in 2004.

European finance ministers, meeting in Brussels on Tuesday, will have to make up their minds very soon whether they want to follow Germany down that route. Although they ducked any decisions on Tuesday, they would have to confront the issues at their next meeting on November 25.

Germany may not command the moral high ground, and European Commission lawyers say Berlin's proposal is illegal, but many think Europe's most powerful economy will prevail.

Even Austria and the Netherlands, the two most hawkish countries on the stability pact, fear that Germany will get its way, with the support of France, Italy, Luxembourg, Portugal and possibly others.

Mr Eichel does not fear the possibility of fines under the stability pact, thinking that the EU will always draw back from imposing sanctions on a powerful country in economic difficulty. But he does fear the political humiliation of Germany being subjected to enforcement proceedings from Brussels over its deficit.

Pedro Solbes, EU monetary affairs commissioner, has indicated to Berlin that he intends to begin those proceedings before the end of the year. That would mean that Brussels would set out specific measures for Berlin to cut its deficit, and would require Germany to present regular progress reports. The theoretical threat of sanctions would loom in the background. This threat has provoked a torrent of rhetoric from Berlin over the last few days, blaming Mr Solbes for an over-zealous interpretation of the rules.
"Do we really need these torture instruments if countries are doing these things voluntarily?" asked one German diplomat on Tuesday.

The crunch will come on November 25 when the 12 eurozone finance ministers have to decide whether to approve the Commission's recommendation that enforcement proceedings should start against France - the first country to appear in the deficit dock. Mr Eichel knows that if finance ministers take action against France, it is inevitable that they would be forced to do the same with Germany.

Sedan franske finansministern Francis Mer lovat att komma med nya åtgärder har straffproceduren
ställts i vänteläge till nästa möte med Eurogruppen och Ekofinrådet den 24 och 25 november.
SvD Näringsliv 5/11 2003

Bosse Ringholm tolkar det franska löftet som en positiv attitydförändring.
- Det är glädjande att Frankrike nu äntligen kryper till korset och medger att extra åtgärder måste till för att rätta till situationen, sade Ringholm.

Länge har Frankrike intagit en attityd att ingenting behöver göras. Om Frankrike förmår presentera nya åtgärder som möter kommissionens krav kan straffproceduren stoppas vid nästa Ekofinråd; om inte så går proceduren vidare enligt stabilitetspakten.

Bosse Ringholm menar att stabilitetspakten trots allt fungerar, även om han anser att kommissionen varit något för kompromissvillig och givit landet ett extra år till 2005 för minska underskottet under straffgränsen 3 procent av BNP.

- Jag tycker att stabilitetspakten fungerar, eftersom vi nu har den här processen i gång mot Frankrike. Det är inte som förr då varje land helt i fred kunde misssköta sina finanser och därmed skada andra länder, sade Bosse Ringholm.

France has avoided sanctions over its breach of eurozone budgetary constraints
BBC 4/11 2003

French Finance Minister Francis Mer told his European Union counterparts at a meeting on Monday that he would set out further measures aimed at cutting his country's projected deficit for 2004 later this month. His pledge was enough to deter the other finance chiefs from voting on a European Commission proposal to force France to bring its budget into line.

received strong support from Germany, the eurozone's biggest economy, itself also deep in the red. At Monday's meeting, all but the Dutch, Finnish, and Austrian finance ministers agreed to wait until Mr Mer puts forward his new spending proposals at their next meeting on 25 November.

Duisenberg: "the danger [of unravelling the Pact] is certainly there and that would be a disaster for Europe.
EU Observer 2003-10-31

Mr Duisenberg told a German TV station, "the danger [of unravelling the Pact] is certainly there and that would be a disaster for Europe. And I do hope, and I am sure the ECB will do everything it can to uphold, to keep upright, the Stability and Growth Pact, which now is certainly under strain".

The comments come ahead of what promises to be a stormy meeting of EU finance ministers next week. Finance ministers of the "eurogroup" - the 12 countries that share the euro - will meet on Monday evening and will be joined by the three countries outside the euro zone - Denmark, the UK and Sweden on Tuesday.
The main - and most controversial - issue on the agenda is the decision of whether to enforce measures that France will have to take to reduce its budget deficit - its tax receipts minus public spending.

Silvio Berlusconi, the Italian prime minister, on Wednesday called for a loose interpretation of the rules of the European stability pact, a day after the European Commission granted France an additional year to bring its budget deficit below the limit set by the pact. Mr Berlusconi also indicated that the European Central Bank should loosen its monetary policy in view of Europe's difficult economic situation. "The main remit of the ECB is to combat inflation, but combating inflation obviously has to be reviewed when the economy is stagnating," he said.

France on Tuesday reacted defiantly to a European Commission compromise proposal that would allow the rogue nation of the eurozone's public finances to escape an automatic fine for its breach of EU budget rules.
Financial Times, October 21 2003

As expected, Brussels conceded France an extra year - until 2005 - to bring its budget deficit below the 3 per cent of GDP ceiling set by the EU's stability and growth pact. But its demand that France curb its deficit in 2004 by an additional 0.4 per cent brought a frosty response from the French finance ministry. It said the government would not "call into question the global balance of the 2004 budget by introducing €6bn ($7bn, £4.2bn) of supplementary measures, which would be destabilising".

This is not the end of the European Union's “stability and growth pact”, but it is probably the beginning of the end.
The Economist 9/10 2003

So is this the death of the stability pact? Thus far, the commission has played things by the book. But if its recommendations prove as feeble as seems likely, that would be a big slide away from the rules. The pact might then evolve into a rough guide to action, rather than the precise legal instrument its framers had sought.

Europe's new constitution will not provide a functioning, coherent framework for economic policy.
Since the majority of the EU policy areas involve some form of economic co-operation, this is a serious flaw.
Wolfgang Munchau, Financial Times 6/10 2003

Mr Duisenberg delivered a parting salvo at member countries that have
flouted the eurozone's stability and growth pact, which sets out rules underpinning the euro
Financial Times 6/10 2003

This came as France seemed certain to break the pact's 3 per cent deficit limit for a third successive year in 2004 and Germany warned its overshoot would be higher than expected.

"Countries can use times of strong growth for reforming their economies and consolidating their public budgets," Mr Duisenberg said. "But some countries have not used that time - I'm speaking of France, Germany, Portugal and Italy. They are not in a position to protest [over] the stability pact rules. "It is their own fault. We cannot forget that eight of the 12 members are fulfilling the criteria."

Hans Eichel, German finance minister, sent yet another warning over the weekend that Germany might breach the stability pact by more than expected because new borrowing in 2004 might exceed the government's forecast of 3.8 per cent of GDP. "It is possible it will be a bit more," Mr Eichel told Hessischer Rundfunk, the local radio station. "We'll see in November with the next tax estimate. It's possible that the growth and tax income data in the autumn will have to be corrected downward."

Germany has twice breached the stability pact and warned it would do so again in 2004.

France misses deficit deadline
The EU executive is expected to draw up detailed budget recommendations for France - the toughest sanction ever attempted against a country
BBC 3/10 2003

The euro's deficit rules are apparently unenforceable yet unchangeable
Why is the Union now intent on incorporating this unworkable piece of legislation into its constitution?
The Economist 2/10 2003

The problem is that, while most people can agree that the current procedures are not working, there is no consensus about how to change them. A few dissident voices, including The Economist, have argued that the European single currency does not actually need rules constraining government deficits at all, since the markets can punish governments that borrow irresponsibly.

The excessive-deficit procedure already exists in European law and is being put into the constitution, with minor modifications. This is a very peculiar state of affairs. No less an authority than Romano Prodi, the head of the European Commission, has called the current rules “stupid”. The governments of France, Germany and Britain have all made it clear that they think they should be made more flexible. The whole thing has been falling apart anyway, as France and Germany have repeatedly breached the 3% limit. The drafting of a new constitution would have provided an ideal opportunity to change the rules and make them more realistic. Instead, the entire cumbersome procedure is being set in the stone of constitutional law.

Dutch slash spending in bid to bail out economy
"Within the space of a few years the Dutch economy seems to have been transformed from a miracle to a source for concern," said Gerrit Zalm, finance minister.
Financial TimesSeptember 16 2003

The Dutch government unveiled €16.9bn ($19bn, £12bn) of spending cuts and tax increases on Tuesday, in a budget intended to bail the Netherlands out of its worst economic crisis in more than 20 years. Severe measures to reverse rapidly declining competitiveness – the result of spiralling wages, a shrinking workforce and a generous social security system – are underscored by a determination to abide by European Union deficit guidelines.

With labour costs increasing 10 per cent more than European competitors' since 1997, and the euro strengthening, domestically produced export growth currently lags 5.5 per cent behind world market growth. Unemployment will hit 540,000 next year, or 7 per cent of the workforce, rising from just over 3 per cent in 2001.

Assar Lindbeck är kritisk mot stabilitetspakten och dess konstruktion.
- Reglerna är fyrkantiga. Och de kommer säkert att ändras när det blir en konjunkturuppgång. Jag tycker det är feltänkt att knyta stabilitetspakten till årliga budgetunderskott. Det hade varit bättre att koppla det till exempelvis budgetunderskottet under en femårsperiod eller till statsskuldens storlek.
Assar Lindbeck SvD 8/9 2003

USA-ekonomer skeptiska till stabilitetspakten
"Om vi skulle begära av Japan att de hade sin budget i balans skulle världsekonomin kollapsa", säger han.
Direkt 2003-09-05

The Financial Times declared the EU's stability and growth pact dead a little over 10 months ago. There is no need to revise that opinion. It has failed to prevent "excessive budget deficits" in Portugal, Germany and France.
Financial Times editorial 4/9 2003

Let us be clear. France's and Germany's flouting of the pact's 3 per cent of gross domestic product limit on budget deficits is not the cause of Europe's economic problems. Indeed, a greater fiscal expansion might have mitigated some of their current woes.

But if it becomes clear the eurozone has no way to restrain fiscal profligacy of member states, countries will have a strong incentive to compete to run looser budgets than other members, ultimately undermining confidence in the currency itself.

Bond markets may be blind to short-term misdemeanours but can suddenly change course, sharply pushing up the cost of borrowing.

France and Germany built the euro together. Now they are demolishing the stability pact together
The Economist 2/9 2003

Germany and France, so long the European Union’s head partnership, have become partners in crime. Last Friday, Germany confessed to the European Commission that its budget deficit for 2003 would breach the stability and growth pact for the second year running.
The pact, a largely German creation, is meant to stop members of the euro area undermining the single currency through fiscal irresponsibility: countries are permitted to run deficits of no more than 3% of GDP.

Deutsche Bank-ekonom orolig för EMU-kollaps
Stabilitetspakten är i gungning och statsminister Göran Persson gör rätt när han som förutsättning för ett euro-inträde ställer krav på budgetdisciplin. Det säger Ulrich Schröder, chefsekonom på Deutsche Bank.
Ekot 4/9 2003

France has admitted that its budget deficit this year will be 4% of gross domestic product - a level way above Brussels rules on fiscal discipline.
BBC 1/9 2003

This would be the second year in succession that France has exceeded the 3% deficit ceiling, and adds to the growing list of eurozone countries to have broken the rules.

Göran Persson attacked Germany, France and Italy - the eurozone's three biggest countries - for failing to prepare for euro membership and undermining the eurozone economy
His difficulties were compounded on Monday by Bundesbank president Ernst Welteke, who said he thought Germany would break the stability pact's limit of 3 per cent of gross domestic product in 2004 - the third year in a row.
Financial Times 1/9 2003

Det är den så kallade stabilitetspakten som fått Persson att börja sväva på målet
DN-ledare 30/8 2003

I stället för att kraftfullt förklara varför han anser att det är avgörande för Sverige att vara med i euro-projektet ägnar han sig åt att diskutera ett eventuellt haveri av stabilitetspakten.
Helle Klein, Aftonbladet 30/8 2003

Perssons resonemang om stabilitetspaktens problem är i sak inte fel. Tyska ekonomin står mitt i en av sina värsta kriser, liksom den franska. Om detta resonerar Persson insiktsfullt. Han borde ha fortsatt med att förklara varför pakten, om än reformerad, trots allt behövs.

Frankrike skapar svängrum på andras bekostnad
Mitt i den svenska EMU-kampanjens slutskede kommer nya rapporter om spänningar inom eurozonen.
Frankrike bryter mot stabilitetspakten
Fredrik Braconier, SvD Näringsliv 29/8 2003

De här kraven som vi talar om, en stabilitetspakt som fungerar, ska självklart vara på plats, säger statsminister Göran Persson.
– Vi har inte en tidpunkt på valsedeln nu i höst utan vi säger ja till den monetära unionen, vi säger ja till det tredje steget och sedan är det upp till regering och riksdag att besluta när vi kliver in.
Ekot 29/8 2003

En informell allians av EU-länder ska pressa EU-kommissionen att omtolka stabilitetspakten.
Det sa Tysklands förbundskansler Gerhard Schröder till journalister i Berlin, enligt Financial Times.
"Vi vill inte lämna stabilitetspakten men vi vill tolka den på ett ekonomiskt förnuftigt sätt", sa han och tillade att hans intryck är att många länder delar hans uppfattning och att fler kommer att göra det.
Dagens Industri 29/8 2003

"It is my impression that this is the view of many countries, and will become the view of others."
The chancellor's comments, to foreign correspondents in Berlin, are likely to further damage relations between Germany and the commission over the pact which underpins the euro.
Mr Schröder has frequently called for more flexibility in the way the pact is interpreted, but has not previously pointed to growing support for this position.
He said Germany's view "is shared by the French government and I haven't seen Italy taking a different position".
Financial Times 29/8 2003

Vi tror att politikerna är mycket räddare för marknaden än för kompisarna i Bryssel. Det har vi fått bekräftat när vi ser att de stora EMU-länderna överskrider stabilitetspakten.
Rune Andersson, Ekot 27/8 2003

Romano Prodi, European Commission president, will back a tough line against France and any other member that continue to flout the eurozone's budget deficit rules
Financial Times 28/8 2003

Romano Prodi, European Commission president, will back a tough line against France and any other members of Europe's single currency area that continue to flout the eurozone's budget deficit rules, he indicated on Wednesday. Mr Prodi said: "Let there be no misunderstanding, the Commission must and will apply the treaty for the common good."

While Mr Prodi conceded that the pact would be interpreted with "maximum flexibility", he stressed that the Commission was in no mood to join politicians and economists wanting to rewrite the eurozone's rules.

Critics argue the pact is too rigid for Europe's economy that is suffering from sluggish growth and weak consumer spending.

Mr Raffarin declined to comment on the prospect of France again being in breach of the pact next year, though he conceded that tax revenues this year had been "disappointing".

Det vore fel att nu börja luckra upp stabilitetspaktskraven bara för att vissa länder har svårt att klara dem. Men ...
EU-parlamentarikerna Olle Schmidt (fp) och Göran Färm (s)
GP 11/8 2003

The European Commission has warned Germany radical restrictions
on its domestic fiscal policymaking as early as the beginning of next year
if it looks set to exceed the stability pact's deficit limit in 2004.
Financial Times 18/8 2003

Innan jag får några kloka svar på hur den havererade stabilitetspakten ska kunna återupprättas och hur man ska kunna undvika att euron leder till mer skatter och en centralisering av politiken, så kan jag inte rösta ja till euron.
Johan Norberg
liberal debattör och bland annat författare till Till världskapitalismens försvar

The European Commission has warned Germany that it could face the imposition of radical restrictions on its domestic fiscal policymaking as early as the beginning of next year if it looks set to exceed the stability pact's deficit limit in 2004.

"If Germany breaches the stability pact's 3 per cent ceiling next year, we will present Ecofin with a new recommendation. It is our duty", said Pedro Solbes, the European Unions's monetary affairs commissioner.

Mr Solbes did not rule out the Commission putting forward its recommendation by the end of this year if its autumn forecast in November were to show that Germany's budget would exceed the EU's stability and growth pact deficit ceiling of 3 per cent of gross domestic product.

Gerhard Schröder, German chancellor, hinted - in an interview with the FT last month - that a breach of the stability pact for a third year running in 2004 is not ruled out.

Despite the recent slight brightening of a gloomy picture, few economists expect the German economy to manage anything more than 0.2 per cent at best for the full year.

Growth could pick up to about 1.7 per cent in 2004 according to some of the more upbeat forecasts. But that would still be below the 2 per cent that the government says is needed to keep the budget deficit below the 3 per cent ceiling.

If Germany breaches the pact in 2004, EU rules demand that Brussels impose the stability pact's highest political sanction: Ecofin, the council of EU finance ministers, would have the right to impose fiscally binding sanctions against Germany.

Det vore fel att nu börja luckra upp stabilitetspaktskraven bara för att vissa länder har svårt att klara dem. Men ...
EU-parlamentarikerna Olle Schmidt (fp) och Göran Färm (s)
GP 11/8 2003

Det vore fel att nu börja luckra upp stabilitetspaktskraven bara för att vissa länder har svårt att klara dem. Men på längre sikt behövs en debatt om huruvida underskottskraven är rimligt formulerade, eller om man borde ge större möjligheter för till exempel tillväxtskapande investeringar.

Också sättet att definiera inflationsmålet och balansera det mot behovet av tillväxt debatteras flitigt - en debatt där Sverige också behövs.

Tyvärr kommer ECB att få en röstordning som alltför ensidigt domineras av de stora ekonomierna. Länderna delas upp i ett antal grupper med roterande rösträtt, som vi har anledning att se över. Vi måste därför få igång en bred europeisk debatt om rimligare regler. Vad som behövs är ett öppnare ECB med principen "en medlemsstat - en röst". Då undviker vi att A-, B- och C- lag skapas i Europa.

Since early 2001, the eurozone has experienced rising unemployment, falling output
and inflation higher than the ECB's target level of 2 percent
The Stability and Growth Pact Revisited, Levy Institute, Policy Note 2003/2

Since early 2001, the eurozone has experienced rising unemployment (from 8.1 percent to 8.4 percent in November 2002), falling output (annual GDP growth declining from 2.5 percent in the first quarter of 2001 to 0.8 percent in the third quarter of 2002), and inflation higher than the ECB's target level of 2 percent, as measured by the Harmonized Index of Consumer Prices (HICP).

These statistics support our earlier conclusion that the institutional and policy arrangements governing the EU are inappropriate for combating unemployment, recession, and inflation.

In our view, inflexible interpretation of the SGP and adherence to the balanced budget requirement would be disastrous and would turn the SGP into the "Instability and No Growth Pact." Our object response therefore is to "scrap the SGP!" Remove the artificial limits on budget deficits, permit borrowing for capital investment, and stop imposing a "one-size-fits-all" policy on EU countries.

"Jeg var måske lidt naiv"
Chirac og Schröder spiller hasard med Europas økonomiske union - og dermed med professor Niels Thygesens livsværk.
Berlingske Tidende 26/7 2003

Det skortede ikke på selvros blandt Europas politikere, da det lykkedes at forene 12 lande i en fælles valuta. De havde opgivet en stor bid af deres magt for det fælles bedste. Regler skulle i fremtiden tvinge dem til en ansvarlig kurs.
De regler er i dag under massiv beskydning fra politikere, der absolut ikke har mistet lysten til at bruge løs. Men også fra et stigende antal økonomer, der mener, at de fornuftige planer i praksis har vist sig at være en snærende spændetrøje.
"Det er klart, at hele systemet er i alvorlig krise," konstaterer professor Niels Thygesen med tydelig bekymring. Han var blandt den håndfuld økonomer, der for ti år skrev og finpudsede spillereglerne for Den Økonomiske og Monetære Union (ØMUen) - det valutafællesskab, hvis borgere i dag betaler med euro og cent.

Hans bekymring er først og fremmest udløst af, at unionens to største medlemmer - Tyskland og Frankrig - helt åbenbart ikke har tænkt sig at rette sig efter de spilleregler, der på det nærmeste er et resultat af aftaler mellem netop de to lande.

Göran Persson, the Swedish prime minister, on Monday attacked Germany, France and Italy - the eurozone's three biggest countries - for failing to prepare for euro membership and undermining the eurozone economy.

With less than two weeks to go before Sweden's referendum on joining the euro, Mr Persson said Germany, France and Italy - which make up about 60 per cent of the eurozone economy - should have done more to put their public finances in order and build up budget surpluses before the euro was launched.

"If they had behaved as Sweden, Finland, the UK and others during the 1990s, preparing their economies for the downturn, we should not have had this situation today," he said.

The eurozone's downturn, and in particular Germany's economic difficulties, have been seized on by Swedish euro opponents who argue Sweden is doing better outside the common currency.

Mr Persson himself warned last week that Sweden might have to delay joining the euro if the stability and growth pact - the rules that seek to control the amounts eurozone countries can borrow - fell apart.

His difficulties were compounded on Monday by Bundesbank president Ernst Welteke, who said he thought Germany would break the stability pact's limit of 3 per cent of gross domestic product in 2004 - the third year in a row. Last month the Bundesbank warned that Germany was on course to breach deficit rules for the third year running unless it did more to cut spending to fund planned tax cuts.

However, Mr Persson on Monday insisted that the eurozone woes were not a reason for Sweden not to join. "Certain eurozone countries are doing better then Sweden," he said.

Mr Persson said the battle to convince Swedes to join the euro was far from over even though opinion polls continue to give the No side a big lead. A Gallup poll on Monday showed the Yes side was closing the gap but still trailing the No camp by 36 to 44 per cent. Mr Persson pointed to the large number of undecided voters and said he believed the result of the September 14 vote would be very close.

"We know from the EU referendum in 1994 that 32 per cent decided how to vote in the last week. It gave a net contribution to the Yes side of 5 percentage points. This time even more people will decide late because the issue is more complicated."

The prime minister accepted that deep divisions in his own Social Democratic party had hampered the Yes campaign. But he ruled out dismissing any of the five cabinet ministers who oppose Swedish euro membership over their views. There has been speculation that Margareta Winberg, the anti-euro deputy prime minister, will lose her job in a government reshuffle after the referendum, while Leif Pagrotsky, the industry minister, is exposed because his views conflict with the strongly pro-euro business establishment.

Mr Persson said: "From time to time there are changes in government but that will not be because of the referendum campaign."

Today it seems Europe is swimming in slow motion.
The reason is simple: there is disagreement over the essentials of the European project.
Public opinion is sceptical, political elites are fatigued
Pascal Lamy, Financial Times 21/3 2007

The writer is director-general of the World Trade Organisation.
He was European trade commissioner, 1999-2004, and
chef de cabinet to Jacques Delors, president of the European Commission, 1985-1994

Does Europe need more or less fiscal competition? Does it want more or less nuclear energy? Does Europe need a minimum wage? Does Europe need a common defence? Does it want more or fewer policies to insure against new risks? Should the European parliament have more powers, as provided for in the draft EU constitution? Should Europe have a bigger common budget for research and development? Should all members move together or is there scope for variable geometry? Can unanimity be scrapped in European decision-making? Where are Europe’s borders? The Europeans do not have a common answer to this daunting list of challenges.

The pact needs to be "modernised and whipped into shape"
EU Trade Commissioner Pascal Lamy
EU Observer 25/7 2003

"too simplistic to run an economy". He says the EU needs a more "intelligent" pact, which requires Member States to balance their budgets over the medium term.

By calling for reform of the pact, Mr Lamy is siding with his compatriot French President Jacques Chirac, who has also recently called for a relaxation of the rules. This is unsurprising, since France is set to break the pact for the third year running in 2004 and could face massive fines as a result. Germany is in a similar position.

Watching the governments of the euro zone dealing with its stability and growth pact is a little like watching an escapologist struggling free from a tight knot of rope. With each successive move, there is a growing sense that it is only a matter of time before they break loose.
Economist 17/7 2003

The diehards fear that if the pact is indeed modified, then all attempts to impose fiscal discipline in the euro area will be imperilled. The consequence, they fear, would be a surge in government deficits and bitter political recrimination.

Perhaps the best option would be to concentrate on levels of government debt rather than on annual deficits. A breach of the 3% limit is a more serious matter in a country like Italy, which still has government debts of over 100% of GDP, than in Germany or France, where the national debt is relatively well under control.

Meanwhile, economists at the European Commission worry that, if governments cannot control state spending in present circumstances, they will face an explosion of deficit spending in decades to come, as pensions costs soar.

(Inledande kommentar: EMU-systemet bygger på att något av följande kan effektueras om ett av medlemsländerna går ner sig konjunkturellt:
1) lönerna sänks generellt i landet (hur nu det skall gå till),
2) arbetskraften flyttar eller flyttas till andra länder, (hur nu det skall gå till), eller att
3) EU tar ut skatter för att kunna pumpa in regionalstöd till det drabbade landet.

Utan dessa mekanismer fungerar inte EMU-systemet. Det lider därutöver av den allvarliga defekten - betonad av Birgitta Swedenborg och Stefan de Vylder - att det nödlidande landet på grund av låg inflation får hög och investeringshämmande realränta, medan länder med överhettad konjunktur och hög inflation får låg - eller negativ - realränta).

Economist (17 juli 2003) påpekar att stabilitetspaktens regel om max 3% budgetunderskott och straffen för att bryta regeln avsågs vara så stränga att ingen regering skulle våga bryta regeln. ”Det har inte blivit så. Förra året bröt Frankrike, Tyskland och Portugal mot den – och Frankrike och Tyskland kommer säkerligen att göra det i år igen. Denna vecka berättade franska finansministern Francis Mer för sina europeiska kolleger att Frankrike troligen skulle bryta 3-procentsregeln nästa år också. Tyskarna säger ännu att de skall komma under 3 procent 2004 men deras tillväxtprognoser ser ganska optimistiska ut.

De europeiska tjänstemännen och politikerna ser en tågkrasch komma och förbereder en undanslingrande manöver. Franska presidenten Jacques Chirac efterlyste denna vecka en ”temporär uppmjukning” av pakten. En grupp sammankallad av Europakommissionens president Romano Prodi har också efterlyst modifiering av reglerna för hur brott mot 3-procentsreglerna skall behandlas.

Men paktens försvarare ger inte upp. Österrikes, Irlands och Hollands finansministrar har krävt att paktens regler skall respekteras och de får stöd av folk inom ECB och delar av kommissionen. De ortodoxa fruktar att om pakten faktiskt modifieras så riskeras alla försök att skapa finanspolitisk disciplin inom euroländerna. De fruktar att konsekvensen blir en svallvåg i ländernas underskott och bittra politiska strider.

Fast vissa av paktens försvarare privat anser det mycket osannolikt att EU-regeringarna nägonsin kommer att rösta för miljardböter för Tyskland och Frankrike, tror de på en tidigare försvarslinje. Nästa år skulle EU:s finansministrar kunna rösta för bindande rekommendationer för länder som upprepat bryter 3-procentsgränsen. Hoppet – troligen utsiktslöst – är att Tyskland och Frankrike då skulle gå med på de nödvändiga åtstramningarna.

Men skulle sådana ändock vara till nytta? Japan på 90-talet och USA idag har reagerat på låg tillväxt genom att dra upp sina budgetunderskott. OECD förutspår att USA:s underskott i år når 4,6% av BNP och det japanska underskottet kan bli så högt som 7,7%. Många ekonomer anser att det inte är särskilt bra att tvinga de europeiska regeringar vars land är nära recession att skära ner offentliga utgifter.

Så hur skall man bäst kunna modifiera pakten? Flera idéer cirkulerar i debatten. En är att exkludera vissa typer av statsutgifter, t ex för forskning och försvar, ur budgetsiffrorna. Men detta är sofisteri: utgift är utgift. En annan idé är att öka 3-procentsgränsen till kanske 5 procent. Eller ändra de särskilda förhållanden under vilken det är tillåtet att bryta gränsen – i stället för en absolut gräns kunde man justera den beroende på konjunkturförloppet.

Det bästa vore kanske att koncentrera sig på nivån för den offentliga skuldsättningen, snarare än på årliga löpande underskott. Att bryta 3-procentsgränsen är allvarligare i ett land som Italien som fortfarande har en statsskuld på över 100% än i Tyskland och Frankrike där skulden är ganska kontrollerbar.

Alla dessa tänkta vägar ur problemet skapar emellertid egna problem. Dagens regler är inskrivna i den europeiska lagen. Att ändra lagen kräver medgivande av flertalet EU-regeringar. Men de länder som arbetat ner sina underskott kan beräknas vara emot att ge fritt fram för syndarna.

Samtidigt fruktar ekonomer inom kommissionen att EU-länderna kommer att drabbas av en explosion i budgetunderskott under kommande decennier beroende på pensionskostnaderna, om de inte lyckas hålla tillbaka redan nu. Detta skulle till slut kunna hota själva livskraften för euron. Sådana farhågor är mycket berättigade. Men rådet till t ex regeringarna i Tyskland och Frankrike är att på allvar gå in för struktur- och pensionsreformer. Att tvinga sina ekonomier in i recession genom besparingar idag kommer inte att lösa eurozonens långsiktiga problem."

Italy PM calls for easing of stability pact
Financial Times, October 22 2003

On Tuesday, the French finance ministry reacted defiantly to a compromise proposal by the European Commission to avoid being fined for breaching the rules of the stability and growth pact, which sets a limit for the budget deficit of 3 per cent of gross domestic product.

With Italy and Germany already in recession, France argues that the European Union risks dragging the eurozone into recession if it insists on deficit-reduction measures beyond those planned in the budget before the French parliament.

Mr Berlusconi said: "The 3 per cent should not be taken as an absolute value beyond discussion and might be adjusted down by one or two percentage points or up to 4 or 5 per cent if you are facing economic stagnation. We have to accept the odd exemption for certain countries to take into account the state of the economy and events such as September 11, the war against terrorism, the campaign in Afghanistan and the US campaign in Iraq."

Stabilitetspakten tillåter ett finanspolitiskt spelrum i krislägen,
utan att för den skulle göra avkall på den politiska disciplin som är nödvändig för att ekonomin inte ska gå överstyr.
SvD-ledare 16/7 2003

På den franska nationaldagen 14 juli manade president Jacques Chirac Europeiska unionen att lätta på stabilitetspaktens gräns för högsta tillåtna budgetunderskott (3 procent av BNP). Detta försök att storma Bastiljen stötte som väntat på en patrull av finansministrar vid Euroländernas möte i måndags.

Infrastrukturinvesteringar på europeisk bog är också ett sätt för Berlusconi att kringgå stabilitetspakten. Detsamma gäller hans hugskott att göra kostnaderna för pensionerna till en EU-angelägenhet. Det är propåer som kan knipa popularitetspoäng på hemmaplan, men som inte är något alternativ till reformer av kostnadsmässigt ohållbara välfärdssystem. Europas tillväxtproblem kan inte lösas med bländverk.

Kontroverserna kring stabilitetspakten demonstrerar att EMU behövs och fyller sin funktion.

Utan den Europeiska monetära unionen skulle det vara enklare för publikfriande politiker att låta budgetunderskott och statsskuld skjuta i höjden. Nu slipper de inte undan

Stabilitetspakten tillåter ett finanspolitiskt spelrum i krislägen, utan att för den skulle göra avkall på den politiska disciplin som är nödvändig för att ekonomin inte ska gå överstyr.

French President Jacques Chirac has reopened the debate on the EU's Stability and Growth Pact
EU Observer 14/7 203

“There's a clear sense that France and Germany are moving side by side on economic co-ordination,” says a French official. If so, no need to worry too much about penalties for breaching the stability pact.
“Since last week, a clear Franco-German strategy has emerged: to pursue structural reforms and cut deficits only after, when growth resumes,” says Jacques Delpla of Barclays Capital in Paris. “This entails each voting no to fines against the other.”
The Economist 3/7 2003

Enligt Padoa-Schioppa, som är ledamot i Europeiska centralbankens direktion, är det inte märkvärdigare att ECB sätter samma ränta för hela euroområdet än att tyska Bundesbank tidigare gjorde det för hela Tyskland, med deras stora regionala skillnader.
DN Ekonomi 30/6 2003

Underskotten i den tyska budgeten innebär ett hot för EU:s stabilitetspakts existens.
Det sade Wolfgang Wiegard, ordförande i förbundskansler Gerhard Schröders råd av ekonomiska rådgivare, vise män, i en intervju med Tagesspiegel på måndagen, enligt Bloomberg News.
(Direkt) 2003-06-30

A meeting is starting at an 18th Century chateau near Berlin on Saturday that could further threaten the credibility of the European Union stability pact.
The German government is already in breach of the pact, but it is considering making tax cuts, effective from 1 January next year, which would almost certainly put it in breach for a second year - and quite possibly also for a third.
BBC 27/6 2003

Gustav Horn, of the German Institute for Economic Research, says the German government has learned the pact "doesn't work" when economic growth is weak.
"Who looks at the Stability Pact in Europe? France neglects it, Italy neglects it, and Germany will neglect it too, because you can't go on with it," he says. "It's the wrong strategy."

France, Germany and Portugal are all forecast to be in breach of the EU stability and growth pact rule to hold budget deficits below 3 per cent of gross domestic product this year. If policies stay unchanged, the Commission suggests Italy will join the ranks of stability pact delinquents next year, with a 2004 deficit of 3.1 per cent at the same time as a public debt to GDP ratio approaching 105 per cent. Little wonder, therefore, that the Commission prefaces its broad economic policy guidelines for the coming three years with the observation that "the EU is at a crucial juncture in its history".
Financial Times editorial, 9/4 2003

"När tyskarna väl klarat att följa stabilitetspakten, kommer ingen annan att tillåtas bryta den."
"Jag är motståndare till en europeisk federation. Kanske den är möjlig i en avlägsen framtid, när vi som sitter här försvunnit till saligare ängder. Därför är detta en viktig fas.
Jag vill inte vara med och tvinga fram en finanspolitik på europeisk nivå."
Göran Persson, Dagens Industri 27/3 2003

The war in Iraq may constitute "exceptional circumstances" leading to a relaxation of the Growth and Stability Pact, the Commissioner for Monetary Affairs, Pedro Solbes said.
EU Observer 20/3 2003

Medan Japan, USA och Sydostasien småningom reser sig, kommer det kontinentala Europa att ligga kvar i recession. Skulle EU dessutom börja rucka på stabilitetspakten kan det äventyra återhämtningen.
SvD-ledare 18/2 2003

Ändå har vi bara sett början. På sikt kan den tyska situationen, och andra liknande, i grunden skaka det etablissemang som fört in sina länder i EMU. När arbetslösheten stiger medan valutakurs, penning- och finanspolitik är låsta av EMU och stabilitetspakten får populister på både höger- och vänsterkanten ett präktigt frislag.

Ett sådant scenario ville inte finansminister Bosse Ringholm ens diskutera när VA intervjuade honom om EMU. Det var alltför hypotetiskt. Och långsökt.

"Å en sidan - å andra sidan"
Heikensten om stabilitetspakten
Affärsvärlden 28 jan 2003

Som stabilitetspakten ser ut i dag kan en ytterligare fördjupning av krisen medföra att undantag kan komma att diskuteras.

Men att just nu göra ändringar i pakten skulle kunna sända ut felaktiga signaler.

Göran Rosenberg DN 4/12 2002
Redan efter par år med euron tycks det uppenbart att de institutioner som har till uppgift att hantera sådana konsekvenser inom ramen för den så kallade tillväxt- och stabilitetspakten inte är effektiva eller legitima nog.

EU-kommissionen föreslår ökad flexibilitet för EMU-länder med starka statsfinanser.
Samtidigt skärps kraven på budgetdisciplin för länder med sämre ekonomi.
Förslaget gynnar länder som Tyskland och Frankrike - men slår hårt mot exempelvis Italien.
DN021127

Germany's Economic Ills
Martin Feldstein
Essays in Honor of Horst Siebert, forthcoming
Even with such a more active fiscal policy, the effect of the EMU is likely to mean greater cyclical fluctuations in unemployment and higher average levels of unemployment than would have been possible with national monetary policy and a national currency.

The Stability and Growth Pact is stupid
What word better describes a regime that tells economies in recession to raise taxes and cut spending?
The Economist, editorial 2002-10-24

A trap of Berlin's own invention
This is what happens to a country that enters a currency union
at an overvalued real exchange rate
By Martin Wolf
Financial Times, October 22 2002

"Awareness of the extraordinary things the Pact has brought about, and will continue to bring about, should not blind us to the limitations of the institutional framework in which it is applied," he said.
"Still less does it mean enforcing the Pact inflexibly and dogmatically, regardless of changing circumstances.
"That is what I called - and still call - stupid.

Romano Prodi faces EU grilling
over his comments that the rules governing the single currency are stupid
BBC Monday, 21 October, 2002

Inte heller när det gäller frågan om den så kallade stabilitetspakten, som ska se till att EMU-länderna håller ordning på sina ekonomier, finns det några akuta problem, anser Göran Persson.
Samtidigt ställer han sig frågande till EU-kommissionens ordförande Romano Prodi som i fredags kallade stabilitetspaktens regler idiotiska.
- Prodis kommentar var lite märklig tycker jag. Jag tror inte det är något fel på stabilitetspakten, däremot har finansministrarna lagt till krav som inte fanns förut med krav på ekonomisk balans 2004.
Det tycker jag var onödigt och har gjort ont värre. SvD 2002-10-20
RE: Göran Persson är en varm anhängare av stabilitetspakten

France defiant over budget deficit cuts
Financial Times October 8 2002
France on Monday night defied its partners in the eurozone, and refused to start cutting its budget deficit in 2003, in breach of its commitments under the European Union's growth and stability pact.

En skur av protester haglade i går mot EU-kommissionens förslag att tillåta Tyskland, Frankrike, Italien och Portugal att flytta fram målet att nå budgetbalans två år, till 2006. EU:s omsvängning försvårar för statsminister Göran Persson att få ett ja till euron i nästa års folkomröstning.

"Det här kan självfallet användas som argument av EMU-motståndarna. Man ska inte undergräva förtroendet för stabilitetspakten vid dess första stora påfrestning", säger ekonomiprofessorn och EMU-anhängaren Carl B Hamilton.

Göran Persson: Sverige går bara med i "fungerande" EMU
Sverige kommer bara att gå med i EMU och övergå till euron om stabilitetspakten garanterat gäller samtliga medlemsländer.
"Om vi hamnar i en situation med budgetanarki inom EU, med ökande budgetunderskott kommer EMU inte att fungera", sade han

Plastic pact
Unbreakable in EU theory, broken in German practice
The Times, editorial, 2002-02-13

The European Commission has voted to issue Germany and Portugal
with warnings over their swelling budget deficits.
What does this mean and what are the likely consequences?
BBC News Online explains

"Euroomröstningen mitt största beslut"
Göran Persson intervjuad i
DI 2002-01-15
"Det är angeläget att tidigt påverka debatten så att vi inte hamnar i en diskussion om ett slags federal superstat som enligt en och annan i Europa är attraktivt"

There could be no excuse for continuing to dodge the need for a new stability pact.
Financial Times ediorial 3/3 2003

With the economic outlook deteriorating and inflationary pressures absent, the ECB must try to boost demand. It may not work - but in- action is certainly worse. If it works too well, and the economies rebound after resolution of the Iraq crisis, there is a relatively small cost in reversing policy and raising interest rates subsequently.

If the ECB swallows its pride and accepts it must manage demand to achieve price stability, European leaders should react. There could be no excuse for continuing to dodge the need for a new stability pact.

The existing pact has been dead for some time and the effort is on to write new budgetary rules. These should allow greater flexibility for countries if they are suffering a downturn or have low debt levels or low future liabilities but bear down on countries with deteriorating structural deficits.

This quest will fail if monetary policy is seen not to respond in difficult times.

France on Tuesday launched the most serious challenge yet to the EU's economic rules by ruling out austerity measures to plug its growing budget deficit. The French government admitted for the first time that its deficit for 2002 was likely to top the EU stability and growth pact limit of 3 per cent of gross domestic product. Jean-Pierre Raffarin, prime minister, told business leaders that it was "probable France's budget deficit exceeded 3 per cent as early as 2002".

He also indicated that the deficit could remain above 3 per cent this year. However, Mr Raffarin - who heads a right-wing government haunted by memories of an unexpected defeat in 1997 after a failure to honour election promises - said there would be no austerity measures. The government last year promised to reduce taxes by 30 per cent over five years.

Det är den så kallade stabilitetspakten som fått Persson att börja sväva på målet
DN-ledare 30/8 2003

Det är den så kallade stabilitetspakten som fått Persson att börja sväva på målet. Euroländernas regelverk för sunda statsfinanser verkar skakigt. Tyskland och Frankrike överskrider gränsen för den tillåtna storleken på budgetunderskottet. Nationella intressen sätts före de gemensamma, europeiska.

Att stabilitetspakten, i sin nuvarande utformning, lever farligt är inget nytt. EU-kommissionens ordförande Romani Prodi har till och med kallat den "dum". Nyligen meddelade förbundskansler Gerhard Schröder att pakten måste förändras och kunna tolkas mer "flexibelt". Men långtifrån alla länder delar Schröders uppfattning och i kommissionen finns, trots Prodis utbrott, en stark vilja att hålla på de regler som medlemmarna kommit överens om.

Fram till nu har japartiernas inställning varit att tala tyst om stabilitetspakten och hävda att EMU-länderna i slutänden kommer att sköta sig, att Frankrikes och Tysklands avsteg är tillfälliga. Men plötsligt vrider statsministern argumentationen i en ny riktning. Om stabilitetspakten "faller sönder" kan den svenska anslutningen försenas. Vi kan alltså vänta.

Det är mycket svårt att befria sig från känslan av att Göran Perssons uttalande mycket mer bär taktikens än det sakliga konstaterandets prägel. Drygt två veckor före folkomröstningen känner en hårt pressad jasida att väljarna ska veta att Sverige fortfarande har en option. Ett ja är ett ja, men med förnuft.

Men det är ett problematiskt upplägg. Vad som presenteras är ett slags vänta-och-se-linje för tveksamma. Men därigenom beskrivs också EMU som ett projekt behäftat med risker och osäkerhet. Risken är att intrycket blir det motsatta än vad Persson avsåg. Hans lugnande ord väcker i stället farhågor och fler frågor.

Göran Persson har i denna valrörelse haft svårt att finna de rätta formuleringarna. Motiv och perspektiv har skiftat. Än dominerar de ekonomiska argumenten för EMU, än de politiska. Visst, de samverkar. Men hur? En helhetsbild saknas.

Göran Perssons senaste uttalande visar att han fortfarande befinner sig på defensiven. Opinionen vägrar att ge med sig. Det är uppenbart att någonting håller på att gå riktigt fel för honom.

För att binda ingående regeringar vid ekonomiskpolitisk disciplin innehåller fördraget mycket starka straffbestämmelser för de stater som tillåter större budgetunderskott flera år i rad. Bland annat utdöms mycket stora böter - räknade i miljarder euro - till det land som bryter mot bestämmelserna.

I sak är det naturligtvis vettlöst att länder som redan har ekonomiska svårigheter ska tvingas att betala tunga böter till EU. Men reglerna skrevs för att vara så avskräckande att inget land skulle våga sig i närheten av regelbrott. Det är vad som nu skett inom EU.

Förra året hamnade Frankrike, Tyskland och Portugal utanför gränsen för tillåtna underskott. I år, skriver tidskriften The Economist, är Frankrike och Tysklanad fortfarande på fel sida lagen. Och hoppet att de båda staterna ska kunna skära ned och spara så hårt i den offentliga utgifterna att man hamnar på rätt sida gränsen nästa år är litet. I stället har i synnerhet Frankrikes president Jacques Chirac argumenterat allt mer intensivt för att de disciplinerande reglerna ska ändras.

Om stabilitetspakten ska vara en stabilitetspakt och inte bara allmänt prat ska den gälla för alla. De hårda reglerna ska inte bara gälla små utkantsstater, som Portugal, Finland eller Sverige. De ska i lika hög grad hålla utgiftshöjare i Europas stora, som Tyskland, Frankrike, Italien och Spanien, i schack.

Och ska reglerna ändras ska detta naturligtvis ske när läget inte är akut, när ingen vet när det blir aktuellt att sätta dem i verket eller vem som skulle kunna drabbas. Rättvisan ska vara blind, inte ta personliga eller nationella hänsyn. Det var därför denna typ av budgetfrågor fördes ut från politikens område.

De drabbade länderna har naturligtvis goda skäl för sina statsutgifter. Men skälen varför EMU-fördraget skrevs har inte försvunnit, även om följderna blivit politiskt obekväma. Ska eurofördrag vinna respekt ska de också följas.

EU:s ekonomiska stabiliseringspakt hotas av ett sammanbrott. Men den svenska regeringen och euroanhängarna vill inte debattera problemen av rädsla för att störa den kommande folkomröstningen.
Lars Calmfors DN Debatt 9/12 2002

Det finns skäl att förändra stabilitetspakten så att det blir lättare att använda finanspolitiken som stabiliseringspolitiskt medel i lågkonjunkturer, det vill säga att då tillfälligt sänka skatter och öka offentliga utgifter. Orsaken är att finanspolitiken i EMU är det enda kvarvarande stabiliseringspolitiska medlet på nationell nivå när penningpolitiken blir gemensam.

Målet kan tolkas som att medlemsstaterna i stort sett ska ha en balanserad budget över konjunkturcykeln, vilket är ett mindre långtgående mål än det svenska på 2 procent av BNP i överskott.

Ändå finns det de som menar att EU:s balansmål är alltför ambitiöst. Det är svårt att förstå, eftersom också andra EU-länder står inför liknande problem som Sverige med ökande offentliga utgifter för en åldrande befolkning. Ett sätt att skapa utrymme för dessa är att reducera statsskulden och därmed de framtida räntebetalningarna.

Det är ett starkt argument mot att införa vad som i europeisk debatt brukar kallas en "gyllene regel", det vill säga att tillåta budgetunderskott för att finansiera offentliga investeringar. En sådan regel skulle också inbjuda till tolkningsproblem och "kreativ bokföring" där olika typer av offentlig konsumtion kan komma att omklassificeras till investeringar.

Ett annat fundamentalt problem med stabilitetspakten gäller möjligheterna att verkligen tillämpa reglerna i "skarpa lägen". Det finns en stark frestelse för finansministrarna i Ekofinrådet att vara eftergivna mot de kollegor som har problem med alltför stora budgetunderskott, eftersom det minskar riskerna för att de själva ska utsättas för sanktioner i framtiden.

Just detta inträffade i våras, när finansministrarna valde att inte tilldela Portugal och Tyskland några varningar.

Grundproblemet är att de slutliga EU-besluten om enskilda länders budgetunderskott och eventuella sanktioner är rent politiska. Man borde i stället dra en klar skiljelinje mellan de politiska besluten om hur reglerna ska se ut och besluten om hur reglerna sedan ska tillämpas.

Dessvärre förs egentligen inte någon diskussion i Sverige om EU:s finanspolitiska regelverk. Särskilt ja-sidan tycks betrakta dessa frågor som störande inför den kommande folkomröstningen.

Men de som är starka EMU-förespråkare borde ha allt intresse i världen av att Sverige försöker påverka stabilitetspaktens utformning. Ett sammanbrott för det europeiska finanspolitiska regelverket skulle med all sannolikhet kraftigt minska stödet för ett svenskt EMU-medlemskap.

Redan efter par år med euron tycks det uppenbart att de institutioner som har till uppgift att hantera sådana konsekvenser inom ramen för den så kallade tillväxt- och stabilitetspakten inte är effektiva eller legitima nog. EU-kommissionens ordförande, Romani Prodi, har öppet betecknat tillämpningen av paktens regler som korkad och regeringarna i ett antal euroländer på väg att överskrida paktens automatiska straffgränser för budgetunderskottets storlek pressas nu hårt att sätta kravet på nationalstatlig legitimitet före behovet av legitimitet för det överstatliga system som är eurons politiska förutsättning.

Följaktligen är systemet redan på väg att revideras, med mindre inslag av automatik och mer av politik, vilket oundvikligen kommer att leda till nya politiska konflikter om hur paktens regler ska tolkas och tillämpas, vilket kommer att göra behovet av demokratiskt legitima institutioner på den överstatliga EU-nivån allt mera uppenbart.

EU states to face procedures for high debts
Prodi calls for "intelligent" implementation of the /Stability/ Pact
EU Observet 27/11 2002

The Commission has proposed to extend its excessive deficit procedure against EU states, to be also used in cases of high debt and not just high deficit. This proposal was adopted unanimously by the Commissioners on Wednesday, as part of the reform of the Stability and Growth Pact (SGP). The Commission can act against high deficits within the existing Treaty and framework of the Pact.

The Commission adopted these proposals after failure by some EU states to stick to the rules, and after that the Pact was criticised for its "inflexibility", most notably by the President of the Commission, Romano Prodi.

- Jag vet hur viktig stabilitetspakten är för mig som anhängare av en nationell finanspolitik
men en europeisk penningpolitik.
Det som ska förena eld och vatten där är stabilitetspakten
EMU-beslutet större än EU-beslutet
Göran Persson i Europa-Posten nr 7/2002

EU stability pact faces far-reaching reform plan
Pedro Solbes, EU monetary affairs commissioner, wants to focus more attention on high debt, arguing Europe is failing to prepare for an impending pensions crisis. He hopes his paper on budgetary co-ordination will restore much-needed credibility to the stability pact, which was designed to underpin the euro by imposing fiscal discipline. The initiative comes only weeks after Romano Prodi, president of the Commission, said the pact was "stupid" because it was insufficiently flexible.
Financial Times 25/11 2002

Europe’s stability pact to take more account of inflation and unemployment.
EU Observer 2002-11-05

The Franco-German motor appears once again to be at full throttle, with a joint call for Europe’s stability pact – the economic framework governing the eurozone - to take more account of inflation and unemployment. The initiative to "refine" the pact and make its strict focus on budget deficits more flexible, was presented yesterday to a meeting of the EU’s 15 Finance Ministers, the Ecofin Council, reports the Financial Times.
This was the first Ecofin meeting since European Commission President, Romano Prodi’s, public pronouncement that the stability pact was "stupid".

Alla inser att stabilitetspakten inte fungerar eftersom den tvingar staterna att föra samma politik i såväl hög- som lågkonjunktur. Alla inser samtidigt att man inte kan ha en valuta och en centralbank och 15 finansdepartement som gör som de vill.

Paktens gemensamma regler måste alltså ersättas av någon slags gemensam finanspolitik – men mellanstatligheten sätter käppar i hjulet eftersom länder som Sverige och Storbritannien anser att deras självständighet hotas.

Romano Prodi faces EU grilling
over his comments that the rules governing the single currency are stupid
BBC Monday, 21 October, 2002

Mr Prodi's comments profoundly annoyed the chiefs of several countries' central banks and many members of the European Parliament. They've demanded that he appear before them to explain himself.

The Stability and Growth Pact is stupid
What word better describes a regime that tells economies in recession to raise taxes and cut spending?
The Economist, editorial 2002-10-24

The Stability and Growth Pact is stupid, Romano Prodi, head of the European Commission, confirmed last week in a lapse of propriety. He was right, obviously—hence the rending of garments in Europe's capitals. What word better describes a regime that tells economies in recession to raise taxes and cut spending?

The pact should be redesigned, or else ignored, but such stark alternatives are frowned on by lurch and muddle. A redesign may require a new treaty, not scheduled until 2005; and discarding the rules in the meantime would make a mockery of the whole thing. So Europe will rub along with the pact and semi-comply, destroying many jobs, albeit not as many as strict obedience would destroy.

"Stabilitetspakten är inte någon tätsittande tvångströja.
I själva verket rymmer den ett stort mått av flexibilitet"
SvD-ledare 2002-10-29

Efter övermoget övervägande har den socialdemokratiska partistyrelsen kommit fram till att Sverige är redo att fullt ut gå med i EMU. I mitten av november ska partiets förtroenderåd komma fram till samma sak med sikte på att resultatet av en folkomröstning (sannolikt hösten 2003) ska leda till euroland. På annat håll formerar sig emellertid ett nytt slags EMU-motståndare.

Rätt och slätt korkat. Så beskrev Romano Prodi nyligen regelverket för den stabilitets- och tillväxtpakt som EMU vilar på.

Stabilitetspakten är inte någon tätsittande tvångströja. I själva verket rymmer den ett stort mått av flexibilitet för de länder som följer dess intentioner och som sedan hamnar i ekonomiskt beråd. Det förespråkarna för att riva upp pakten egentligen önskar är en större handlingsfrihet för länder som varken sköter sig eller har för avsikt att göra det.

A trap of Berlin's own invention
This is what happens to a country that enters a currency union
at an overvalued real exchange rate
By Martin Wolf
Financial Times, October 22 2002

Germany's economic performance has deteriorated, decade by decade, since the second world war. In the 1990s, Germany became the sick man of Europe, with compound growth of 1.4 per cent after the unification boom. Now Europe's largest economy can hardly cope with the eurozone's fiscal rules. The irony is that these rules, not to mention the European Central Bank's aims and policies, were German ideas. The country is caught in a clever trap of its own making.

A natural response is to suggest that something is going wrong in the way the monetary union functions. That position is wrong. This is exactly how it should operate, though the pain is exacerbated by the low inflation target of the ECB. The stability and growth pact may be stupid, as Romano Prodi, president of the Commission, argued last week. But what is happening to Germany is not the result of that pact.

Today, inflation in the eurozone varies from Germany's 1 per cent to close to 4 per cent in Greece, Ireland, Spain, the Netherlands and Portugal. The European Central Bank's short-term interest rate of 3.25 per cent accordingly means strongly positive real rates in Germany but negative ones in the high-inflation countries.

Post-unification Germany has an overvalued real exchange rate. That has been ameliorated, maybe temporarily, by the post-1995 weakness of the D-Mark and then the euro. But there also needs to be a correction within the eurozone. If the ECB persists with its low inflation target, Germany both will and must have an extended period of very low inflation, perhaps deflation. Over time, the needed adjustment in relative prices will then occur. This is what the French used to call competitive disinflation. It caused years of pain. Now it is Germany's turn to suffer.

This is not a cyclical challenge but a structural one. It is what happens to a country that enters a currency union at an overvalued real exchange rate. Germany made its uncomfortable bed and must now lie on it.

Mr Prodi told the parliament that he was simply saying publicly what politicians, businessmen and economists had told him in private.

The pact, he argued, could not be applied regardless of the economic downturn in Europe and beyond. “This downturn is so marked,” he went on to say, “that a good part of the global economy could be at risk of the kind of deflation we thought we had put behind us.”

Germany’s problem is simple. Last year’s unexpected recession and this year’s unexpectedly sluggish recovery has put enormous strain on the government’s finances. Spending is higher than planned and tax revenues are falling faster than anticipated. Many economists have long questioned the wisdom of a pact which obliges governments facing economic slowdown to raise taxes or cut spending—the opposite of providing some sort of fiscal stimulus to aid recovery.

UK wants reform on EU government borrowing
/Stabality Pact/
Financial Times October 20 2002

Gordon Brown, UK economy minister, wants to see tougher rules to stop government borrowing running out of control in Europe as the current set of rules crumbles, Treasury officials have said.

The stability and growth pact, intended to keep a lid on EU governments' borrowing, has been battered by the failure of several countries, including Germany and France, to abide by the rules. Even Romano Prodi, the European Commission's president, last week called the pact "stupid".

Now Mr Brown is making it clear that although he has fundamental objections to the way that the pact operates, he does not want to see a fiscal free-for-all in Europe in which countries can borrow as much as they want. A Treasury official said: "We need a long-term solution which strengthens fiscal discipline: what we need are credible rules that people then stick to."

Until now, Mr Brown has held back from making any public comment, but officials believe that the debate over the stability pact is evolving rapidly. As the pact is increasingly called into question, Mr Brown believes, EU finance ministers must look to reform it with practical fiscal rules that will endure over the long term.

EU's Prodi Calls Deficit Reduction Accord `Stupid'
Paris, Oct. 17 (Bloomberg)
- Full text at BBC

European Commission President Romano Prodi called Europe's budget-deficit limits ``stupid'' and ``rigid,'' sowing fresh divisions over how to save the European economy from recession.

Prodi said the stability accord, designed by Germany to create confidence in the euro, needs to be applied more loosely to help the 12-nation economy recover from growth estimated at less than 1 percent in 2002, the slowest pace since 1993.

``I know very well that the stability pact is stupid, like all decisions that are rigid,'' Prodi told Le Monde in comments confirmed by the commission. ``The stability pact is imperfect, we need a more intelligent mechanism and more flexibility.''

Och så är det den förfärliga Stabilitetspakten.
Den bygger på den i grunden felaktiga tanken att när det blir dåliga tider och statens skatteinkomster sjunker och utgifterna för arbetslösheten ökar, då skall staten skära ner på sina utgifter eller höja skatterna. Det är dårskap.
Rolf Englund i EU-krönika i NWT 2001-08-10

- Jag vet hur viktig stabilitetspakten är för mig som anhängare av en nationell finanspolitik
men en europeisk penningpolitik.
Det som ska förena eld och vatten där är stabilitetspakten
EMU-beslutet större än EU-beslutet
Göran Persson i Europa-Posten nr 7/2002

Testimony before the Committee on Economic and Monetary Affairs of the European Parliament
Monetary policy can certainly not heal structural problems in the economy, such as those underlying the high level of unemployment.
Dr. Willem F. Duisenberg, President of the European Central Bank, Brussels, 8 October 2002.

Let me make a remark in this context, linked to comments which arise with a certain regularity in public debate and which argue that monetary policy should follow a different orientation, an orientation in which price stability is not the overriding objective.

I should like to recall in this connection the fundamental and yet simple principle that monetary policy should not be overburdened with objectives that it cannot fulfil. It is well established that monetary policy can only control price developments over the medium term and cannot have an impact on output beyond the short term. Monetary policy can certainly not heal structural problems in the economy, such as those underlying the high level of unemployment.

In line with these principles, the Treaty establishing the European Community has assigned the ECB the primary objective of maintaining price stability. In the end, strictly following this mandate, with the appropriate medium-term orientation, is the best contribution the ECB can make to supporting sustainable non-inflationary growth and a high level of employment in the euro area.

It is crucial that fiscal policy fully respects the basic principles of the Treaty and of the Stability and Growth Pact, namely to avoid excessive deficits and to attain budgetary positions close to balance or in surplus in the medium term.

If the Pact is to work efficiently, all countries with remaining imbalances must commit themselves to implementing a clear consolidation strategy. Such a strategy should specify a credible adjustment path with significant improvements in the cyclically-adjusted budget balance every year. This path should be followed strictly and completed within the shortest possible time frame. It must be based on realistic assumptions for the economic environment and include clearly specified measures.

Furthermore, accounting rules must be rigorously applied and strict procedures established to monitor the implementation of the consolidation strategies. In the end, the full adherence of all governments to the Stability and Growth Pact can only be beneficial for the euro area.

Mr Duisenberg has also implicitly criticised the compromise reached by euro-area finance ministers at the October 8th meeting. This sets back the deadline for balancing budgets by two years, to 2006. But the delay in implementing that part of the EU’s stability-and-growth pact is little more than a recognition of the inevitable.
Germany, the main architect of the pact, is already close to breaching the current ceiling (a budget deficit of no more than 3% of GDP). Portugal has already burst through the limit, and both France and Italy look like doing so soon.
France, to the intense irritation of some of its partners, has made it clear it will not even start to bring down its structural deficit (which excludes variation due to the economic cycle) towards balance until after 2003.
The Economist October 8 2002

France is right to breach the stability pact
David Walton, cheif European economist at Goldman Sachs.
Financial Times, October 9 2002 22:05

Tthe pact has serious shortcomings. It is a one-size-fits-all policy that makes no distinction between countries where there are concerns about debt sustainability and those that have very little debt. For most countries, there is no sensible economic rationale for achieving a balanced budget since this would ultimately reduce the ratio of public debt to GDP to zero. Few politicians would do this in preference to cutting taxes or increasing spending. Furthermore, balancing the budget can be painful.

Second, governments should be allowed to run budget deficits above 3 per cent of GDP when these are clearly due to cyclical factors. This would prevent an inappropriate tightening of fiscal policies during downturns. If the eurozone were to aim for a structural budget deficit of 1.5 per cent of GDP, it would become more likely that governments would breach the 3 per cent deficit limit when growth slowed. This is already allowed under the treaty, provided the breach is exceptional and temporary and deficit remains close to 3 per cent.

France was on Tuesday left isolated and facing a European Union reprimand after blowing a hole in the credibility of the rules that underpin the euro. The row came as Wim Duisenberg, president of the European Central Bank, attacked France, Germany and Italy for their failure to put their finances in order and rejected calls for an interest rate cut to kickstart the European economy.

Francis Mer, French finance minister, found himself outvoted 11 to one by other eurozone finance ministers in the early hours on Tuesday after refusing to honour commitments to cut France's budget deficit. Now France faces the possibility of a formal rebuke from the EU and a demand that it amends its 2003 budget, which includes plans for tax cuts and increased spending.

The issue is the latest crisis for the EU's stability and growth pact - the strict rules designed to impose budgetary discipline on the 12 eurozone governments.

France on Monday night defied its partners in the eurozone, and refused to start cutting its budget deficit in 2003, in breach of its commitments under the European Union's growth and stability pact.

In heated exchanges which lasted into the early hours, Francis Mer, French finance minister, refused to amend his budget for next year, in spite of repeated demands from his colleagues.

The row is the most serious since the launch of the euro in 1999, and is a serious breach of the principle of peer pressure on which the single currency works.

A statement at the end of the meeting of eurogroup finance ministers in Luxembourg, said "all ministers but one" had agreed a programme for cutting deficits.

France's refusal to honour its commitments could have lasting repercussions, and has soured relations in the 12-member euro club.

The Netherlands, Spain and Finland led the accusations that France appeared to believe there was one rule for large countries and another for the smaller members.

"This is very serious - there will be consequences," said Hans Hoogervorst, Dutch finance minister.

"You could even see from the body language of Francis Mer that he didn't want to find a solution."

Mr Mer, struggling to honour election tax cutting pledges made by President Jacques Chirac, has argued that his priority is to restore growth to the French economy.

Faced with French intransigence, Pedro Solbes, EU monetary affairs commissioner, has reluctantly accepted Mr Mer will need until 2006 to balance its budget - two years later than agreed by EU leaders in Seville in June.

Germany, Italy and Portugal, all of which have their own deficit problems, are also being given more time, but they are pursuing budgets which are starting to make inroads into government borrowing.

Sverige kommer bara att gå med i EMU och övergå till euron om stabilitetspakten garanterat gäller samtliga medlemsländer. Det sade statminister Göran Persson på tisdagen.

"Om vi hamnar i en situation med budgetanarki inom EU, med ökande budgetunderskott kommer EMU inte att fungera", sade han och hänvisade till rapporter om hur andra EU-länder kan komma att följa Portugal och överskrida stabilitetspaktens gräns på 3 procent av BNP.

"Vi kommer att gå med i EMU om vi har en stabilitetspakt och ett system som fungerar, och jag utgår från att det kommer att bli så. Allt annat vore en sensation", sade Persson.

Förra månaden beslutade EU-kommissionen att inleda ett förfarande som kan resultera i politiska och ekonomiska sanktioner mot Portugal. Detta sedan Portugals underskott uppgått till 4,1 procent av BNP under 2001.

Europe should stick to the stability pact
By Jose Maria Aznar
Financial Times, October 3 2002 20:30
The writer is prime minister of Spain

Six months ago in Barcelona, European Union leaders mapped out an agenda of macroeconomic stability and structural reform. We agreed to undertake the necessary steps to improve growth and job creation. We agreed to open markets, make our economies more flexible and adapt them to the opportunities created by globalisation. We also committed ourselves to consolidating our public finances and setting a date for balancing our budgets.

The Stability and Growth Pact and the Lisbon strategy - a programme of reforms to liberalise European markets, modernise welfare systems and increase employment - together represent a very solid framework. The entire EU considered it appropriate six months ago at Barcelona. It continues to be so today. We should not take the risk of changing it.

A /Stability/ pact worth keeping
By Jürgen Stark
The writer is vice-president of the Bundesbank
Financial Times September 3 2002 19:56

The current economic slowdown in Europe has given renewed impetus to critics of the growth and stability pact, the agreement designed to ensure budgetary discipline in the eurozone.

Until recently, critics focused on the pact's supposed negative short-term effects, arguing that it hampered anticyclical fiscal policy because it supposedly placed overly tight limits on governments' freedom to run budgetary deficits during a downturn. Now, it seems, they have discovered some long-term effects, too: the pact impedes the financing of public investment projects. As a result, it is inhibiting growth in the eurozone.

The 1992 Maastricht treaty marked a turning-point in economic policy, with its strict medium-term orientation towards stability as the basis for growth and employment. The stability pact tightened these regulations even further. All the member states pledged to achieve a medium-term budgetary position that is balanced or in surplus. This was necessary to prevent conflicts with the European Central Bank in its goal to maintain price stability. Another objective, however, was to convince the public and the financial markets of the Community's ongoing orientation towards stability.

The pact is therefore part of the foundations of monetary union; and facilitated the European Council's decision to allow some countries to join the union even though they had a high debt level. In return, these countries promised to make a special effort to reduce budget deficits.

Any weakening of the pact would severely damage the very foundations of monetary union. It would be a blow to those countries that trusted in the commitment made by other member states, particularly those with high levels of debt, and gave up their currency in favour of the euro.

It would also substantially reduce those countries' willingness to embark on further political integration.

Moreover, any weakening of the pact would send a disastrous signal to the markets and would trigger increased volatility and greater instability.

These countries have only themselves to blame. It is unacceptable that the countries calling for a relaxation in the pact's rules are also the ones that have made insufficient efforts to consolidate their budgets.

There must be no backsliding into the fiscal sloppiness that prevailed during the 1970s: the introduction of the single currency is an irreversible process that demands discipline from all the member states.

The price of a common currency /the stability pact/
By Horst Siebert Financial Times; Aug 06, 2002

The writer is president of the Institut für Weltwirtschaft in Kiel, Germany,
one of the government's Five Wise Men and
member of the Group of Economic Analysis of the President of the European Commission (RE: one of them)

Only seven months have passed since the eurozone's inhabitants started carrying the single currency in their wallets. But in that time the euro - and, in particular, the growth and stability pact that underpins it - has already turned into an awkward political issue:

Germany narrowly avoided a formal early warning letter from Brussels earlier this year over its growing budget deficit;

Portugal faces possible sanctions for running a deficit last year well above the 3 per cent permitted by the stability pact;

But to give up the stability pact would be a mistake. The stability of a currency is strongly influenced by the solidity of a state's finances. If state finances get into disarray and financial markets come to believe that a country's debt burden will be unmanageable in the longer term, a shadow is cast over its currency.

Doubts arise over whether the central bank will stick rigorously to a stability-oriented monetary policy.

The problem is more pronounced within the eurozone, where a communal monetary policy is set alongside nationally autonomous fiscal policies. Without the stability pact, member states would be tempted to become free riders. When the domestic budget was tight, they could temporarily abandon a sustainable financial policy without being punished by higher interest rates or having to accept a depreciation of their currency, as they would have been before the eurozone.

Even an astonishingly high current account deficit of 10 per cent of gross domestic product - as in Portugal's case - is possible.

Within the eurozone, the harmful effects of an irresponsible financial policy become communal without a stability pact. If member states can pursue such a policy without facing unpleasant consequences, the common currency cannot but suffer. The European Central Bank alone cannot compensate: it would have to adopt such a strict interest rate regime that even responsible countries would suffer, leading to conflicts between eurozone members.

And it is only realistic to assume that members' constitutional frameworks are insufficient to prevent their resorting to unsound state finances. Thus, national fiscal policies must be constrained in such a way that countries will avoid unsustainable policies.

Of course, the stability pact restricts the room for manoeuvre enjoyed by national fiscal policymakers. But this is the price that must be paid for a common currency.

Historically, stability between currencies has been possible only when countries have been prepared to relinquish some national sovereignty. (RE: There is not history, really. Because EMU, or something like it, has never happened before.)

Anyone who finds it hard to imagine just how damaging irresponsible policies can be should consider the Brazilian currency crisis in 1999. When the governor of the Minas Gerais province announced that he would not service his region's debts any more, a downward spiral began in which the Brazilian Real lost half its value.

Some may consider this analogy far-fetched. But the eurozone also has a Minas Gerais problem of its own, albeit not of the same intensity. The stability pact is vital to prevent a similar situation arising in Europe.

The stability pact can of course be improved. It is, for example, clearly a problem that finance ministers are at the same time supervisors and supervised - that is, are monitoring one another's compliance with the rules.

In Germany, the ECB may have won its first struggle with national politics - against Oskar Lafontaine, former finance minister and leader of the Social Democratic party's left wing.

But at a European level, the first big conflict between national interests and communal monetary policy is still to come.

In such a situation, the stability pact is a cornerstone of monetary stability and the eurozone as a whole. It is a critical safeguard against the weak spot that sovereign nation states represent.

The head of the European Central Bank has delivered an unprecedented criticism of the French government. Speaking in Luxembourg, ECB president Wim Duisenberg accused France of unilaterally reinterpreting eurozone rules on budget deficits.

The move followed a warning by France last month that it would only meet an EU target for balancing its public finances if the country's economic growth reached 3% next year.

The European Union's fiscal stability pact was once described as a medieval torture chamber. Its instruments were unlikely to be used but the punishment would have been so painful that the threat alone was enough to ensure compliance.

Rules enforcing fiscal discipline in the single currency area are indispensable. In a monetary union with decentralised fiscal policy there is always the potential for free-riding. If one government borrows too much, the rest will pay the price in higher interest rates.

But the EU has been stuck with a pact that is potentially pro-cyclical and fails to differentiate between high- and low-debt countries. Not only are these the wrong rules but they also lose credibility each time the member states and the Commission argue over their meaning.

It is time for finance ministers to consider a new pact. A limited reform would involve making structural budget deficits the crucial measure for both the 3 per cent deficit limit and the balanced budget requirement. But this would still leave a one-size- fits-all restriction. Given its low debt, Britain, in the euro or not, should be allowed to borrow for public investment. Italy, with its much higher debt, should run a much tighter fiscal policy.

A pact along these lines would ensure that countries that had made the most progress with fiscal consolidation were free to reap the benefits. At the same time it would place heavier obligations on those governments that had not done enough. The eurozone needs a new political and economic bargain if the single currency is to work properly. It is time to rewrite the pact.

Pakten, som bildades i syfte att bana väg för EMU och den gemensamma valutan, ifrågasätts numera öppet av de stora medlemsländerna Frankrike, Italien och Tyskland. Många bedömare frågar sig nu om det överhuvudtaget är möjligt med en samordnad europeisk finanspolitik.

I takt med att en majoritet av EU:s medlemsländer 1999 knöt sina nationella valutor till euron lades grunden för en gemensam europeisk penningpolitik under ECB, Europeiska centralbanken. För att trygga unionens makrofinansiella stabilitet hade man tidigare skapat en finanspolitisk överenskommelse mellan medlemsstaterna, stabilitetspakten.

I veckan sammanfattade den italienska finansministern Giulio Tremonti kritiken mot pakten. I tisdagens utgåva av Financial Times efterlyser Tremonti ökad makt för Ecofin, forumet i vilket unionens 15 finansministrar regelbundet möts, på bekostnad av Europeiska kommissionens centrala direktiv.

Tremonti menar att stabilitetspaktens strikta krav på budgetbalans fyllde en funktion i samband med lanseringen av euron, men att dessa nu spelat ut sin roll när finanspolitikens fokus ligger på tillväxt.

Premiärminister Silvio Berlusconi utlovade i den italienska valrörelsen lägre inkomst- och bolagsskatter. Hans regering, och ytterst dess finansminister Tremonti, är nu fast i ett delikat dilemma. Väljer de att hålla sitt löfte till de italienska väljarna är risken stor att det skapas underskott i den italienska statsbudgeten som gör att man bryter mot direktiven i stabilitetspakten.

På andra håll i Europa hörs liknande tongångar. Under snart ett års tid har man i Bryssels maktkorridorer med oro följt Tysklands makroekonomiska utveckling. Redan i augusti 2001 beskrev den tyska finansministern Hans Eichel sitt lands ekonomiska läge som ”otillfredsställande”.

Den tyska regeringen vill lindra effekterna av den vikande världskonjunkturen genom att sänka landets skattetryck. Och nyligen sände den nyvalda franska högerregeringen ut liknande signaler.

Det finns många problem med den rådande ordningen. Att i dagens föränderliga omvärld låta en överenskommelse från 1996 allena diktera villkoren för samtliga medlemsstaters finanspolitik är vanskligt.

De europeiska regeringarna är låsta i en finanspolitisk överenskommelse som inte går i takt med tiden. Dagens ekonomiska klimat är mer skiftande än någonsin tidigare. Världshändelser som spekulationsbubblor och terrordåd förändrar över en natt den ekonomiska och politiska verkligheten. Sådana tider kräver flexibla regelverk.

Stabilitetspakten reser även demokratiska frågetecken. Vid ett regeringsskifte i höstens svenska riksdagsval kommer borgerligheten inte att kunna genomföra sina utlovade skattesänkningar utan att bryta mot EU:s direktiv. Väljarnas röst blir betydelselös när finanspolitiken redan på förhand är fastslagen från Bryssel.

En gemensam inriktning för den europeiska finanspolitiken är nödvändig men kan ta sig olika uttryck. En nödvändig åtgärd är att låta finansministrarna i Ecofin få ökat inflytande över policybesluten.

Exempelvis borde stabilitetspaktens regler kunna luckras upp för att tillåta tillväxtstimulerande skattesänkningar.

Det kommer att ställa större krav på den ekonomiska politiken. Som medlemmar i valutaunionen kan vi inte självständigt välja ränta eller inflationstakt. Svängningar i konjunkturen måste hanteras på något annat sätt. Och eftersom Europeiska centralbankens penningpolitik omöjligen kan vara speciellt anpassad till svenska förhållanden, blir det regeringens och riksdagens sak att sköta stabiliseringspolitiken i övrigt.

Bland förslagen finns också den harmlösa idén om inrättandet av ett finanspolitiskt råd, som ska presentera självständiga rekommendationer en månad före vår- respektive höstbudgeten. I övrigt sätts hoppet till ekonomins så kallade automatiska stabilisatorer, det vill säga att statens inkomster och utgifter tillåts variera med konjunkturen.

From Berlin, Brussels and other European capitals, the message going to the French government this week could scarcely have been louder or clearer.

Alarmed that President Jacques Chirac's budget proposals risk tearing apart the eurozone's rules for fiscal discipline, some of Europe's most influential policymakers are asking France to think again. "The French government cannot expect us to lift a finger to help soften the stability and growth pact," says Hans Eichel, Germany's finance minister, referring to the agreement that obliges eurozone governments to balance their budgets over the medium term. "It really is a matter of credibility," observes Jean-Claude Juncker, Luxembourg's prime minister.

At issue are the arrangements under which the eurozone's 12 national governments commit themselves to fiscal discipline, the European Commission monitors their compliance and the European Central Bank, if satisfied, may reciprocate with low interest rates. Such are the risks of upsetting this delicate tri-partite mechanism, purpose-built for European monetary union, that all have an interest in avoiding not only its collapse but also public disputes over its operation.

Yet policymakers accept that the budget problems in France - like those in Germany, Italy and Portugal, which are equally in the spotlight - come at a sensitive time. An unfortunate coincidence of Europe's electoral calendar and the world economic cycle has meant that the stability pact has been under strain for the past year from a combination of weak economic growth and the exigencies of electoral politics.

ECB inflation target may act as straitjacket on economy
Financial Times; Feb 18, 2002

Sticking too rigidly to the European Central Bank's inflation target could "easily" push Germany "to the verge of deflation", a group of distinguished economists say in a paper to be published tomorrow.

The ECB's 2 per cent target ceiling for inflation "may simply be too tight", claim the seven economists, writing in the first annual report of the European Economic Advisory Group.

The report - whose authors include Hans-Werner Sinn, president of Germany's Ifo institute, and John Flemming, former executive director of the Bank of England - will help to keep alive the debate over whether the monetary rules set for the eurozone are acting as a straitjacket on its economy.

Germany has been having difficulties over the European Union's “stability pact”. Thank goodness, everything has now been sorted out. It was all rather puzzling for those who were trying to follow events. Oddly, though, the financial markets were not in that group: they acted as if nothing had happened. Strange.

Plastic pact
Unbreakable in EU theory, broken in German practice
The Times, editorial, 2002-02-13

It should be no surprise that politics trumped economics in Brussels yesterday. European economic and monetary union has been a political venture right from the start. Remember: back in 1990, François Mitterrand and Jacques Delors came up with EMU as a way of preventing united Germany and its mighty mark from reasserting dominion over the Continent. They then persuaded Helmut Kohl that EMU would put Europe on the fast track to political union.

If the euro has “failed” its first disciplinary test, it is because no one anticipated that German weakness would ever be the eurozone’s most pressing problem. That larger failure is of more concern than whether the European Commission has egg on its face. It confirms that the single currency has been based all along on false political assumptions.

Germany’s weakness is not solely a product of monetary union. This is the tenth consecutive year in which German growth has lagged behind the European Union average. Historic risks with German finances were taken at the time of unification.

Herr Kohl’s insistence on a one-for-one conversion of the wretched Ostmark, and the almost overnight extension of West German wage rates and welfare benefits to the eastern Länder, were a misplaced gesture to political reconciliation that had to be paid for with soaring public debt, punitive tax increases and massive job losses — first in the uncompetitive East, and then in the prosperous West.

Scrap the stability pact
Aug 23rd 2001 From The Economist print edition
Constraints on Europe's fiscal policies could seriously damage its economic health

THOSE who invent monstrous chopping machines, from Procrustes to Dr Guillotin, have a nice way of subsequently falling victim to them. It was thus divinely fitting that Hans Eichel, Germany's finance minister, should be one of the first to grumble publicly about Europe's “stability and growth pact”, whose fiscal limits Germany may soon run up against.

For the monstrous stability pact was designed and imposed, against the reservations of other putative single-currency members, by the previous German government, back in 1996. Mr Eichel has since renounced his apostasy, sworn fealty to the doctrine of budget discipline and promised not to seek any changes to the stability pact. More's the pity. For, as he initially suggested, the automatic chopping that can be required by the stability pact could do serious harm in an economic downturn—of precisely the kind that now looms.

Eichel puts case for changes to EU stability pact
Financial Times, August 16 2001 19:05GMT

Hans Eichel, German finance minister, has held out the prospect of changes in the European Union’s stability pact, which enforces fiscal discipline in the eurozone.

Mr Eichel, answering press questions in Riga, Latvia, on Thursday said it could be useful to focus more on spending targets rather than following rigid annual deficit reduction. His comments reflect a broader debate in the eurozone as EU governments grapple with an economic slowdown that is reducing tax revenues.

Germany was the original achitect of the stability pact - conceived partly as a means of persuading the German public that countries such as Italy with poor records of fiscal discipline would be kept in check if they became members of the single currency.

Slower-than-expected growth is making it more difficult for some governments to stick to this year’s deficit-reduction targets. It is also calling into question the 1993 Maastricht treaty’s plan for a steady movement toward balanced budgets in the medium term.

Mr Eichel made clear he remained committed to budget discipline. But he said the treaty was agreed when most governments were running heavy budget deficits.

It might be more useful to follow spending targets. “You can plan spending in a budget, but you cannot plan your income. The decisive thing for me is that we pursue [budget] consolidation steadfastly, independently of whether or not there is more or less income one year due to economic developments.”

Mr Eichel later clarified his remarks. “To dispel any doubt, I want to say clearly that I support fully the stability and growth pact, its instruments and all the responsibilities that arise out of it and which we signed up to. This Germany suppports fully.”

Belgium, which holds the presidency of the EU, said there was already a consensus within the EU over a more flexible approach to the pact. An adviser to Didier Reynders, finance minister, said: “If tax receipts are lower than expected in nominal terms a higher deficit could be accepted.”

The position was agreed by finance ministers in June. At their Gothenburg summit later that month, EU leaders implied that an economic downturn - and a consequent revenue shortfall - should be taken into account when assessing the pact.

Mr Eichel said a quick reform of the pact was unlikely. “I am for keeping the deficit targets in the first instance for pedagogical reasons, knowing we do not decide this on our own.”

Trust or mistrust thy euro neighbour?
Stabilitetspakten
July 19th 2001 From The Economist print edition

With less than six months to go before Europe’s single currency is issued in notes and coins, strains are beginning to appear among the 12 countries in the euro-zone

The euro group has seen this problem coming for a while. When the commission controversially rebuked Ireland earlier this year—for cutting taxes in the middle of a boom—many eurocrats said sotto voce that the real point had been to send a signal to Italy that the euro club was serious about holding its members to their promise to run fiscal policies that reflected the general European interest. Indeed all euro countries have signed up to a German-inspired “stability and growth pact”.

This states that any country in the euro-zone that runs a fiscal deficit of more than 3% of GDP could be subject to huge fines of up to 0.5% of GDP. As well as agreeing to this draconian procedure, club members have agreed to maintain budgets that are, in normal times, “close to balance or in surplus”. The EU’s latest guidelines foresee all euro countries achieving this goal by 2004.

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Stabilitetspakten