Revolt against Stability Pact

The European Union’s Stability Pact is steadily heading toward abolition, as an increasing number of eurozone members are casting fiscal orthodoxy aside and, with it, the rule that budget deficits should not exceed 3 percent of a country’s gross domestic product (GDP). Recent declarations by France’s Economics Minister Alain Lambert that his country’s budget deficit will continue to exceed the 3 percent level beyond 2006 is a blow against an economically homogeneous Europe and invites everyone else – even the 10 newcomers who will join next year – to become «disobedient.» The continuing French revolt will be one of the subjects of the unofficial session of EU finance ministers (Ecofin) at Lake Como in Italy today and tomorrow. The session is of special interest to Greece and, personally, to Economy and Finance Minister Nikos Christodoulakis. He will arrive in Italy after spending over a week announcing (or co-announcing, with Prime Minister Costas Simitis) measures that tend to inflate government spending and, consequently, the budget deficit. Christodoulakis is to unveil to his Ecofin colleagues a novel method, according to which one can keep the budget deficit at more or less the same level while increasing spending. At least, this is what the government claims. Greece’s method will be a challenge to France and Germany which keep admitting that their extra spending leads to increased deficits. Very recently, Christodoulakis had declared to the Financial Times that it was necessary to continue along the path of fiscal rectitude in order to ensure growth. His declaration concealed his worry about the EU focusing instead on public debt.

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