Pandora’s box ought to have stayed shut. However, now that the European Commission has been forced to propose that EU member states with a high fiscal deficit will have until 2006 rather than 2004 to balance their budgets, the voices calling for a breakout from the tight corset of the Stability and Growth Pact (SGP) are multiplying. We should remember that European leaders agreed on the SGP rules – a budget deficit no larger than 3 percent of a country’s gross domestic product (GDP), a commitment toward balanced budgets by 2004, and the duty of presenting annually updated «progress reports» to the Commission – in order to protect the euro. At the time of the final, difficult negotiations toward the establishment of the single currency in the mid-1990s, and at a time when financial criteria were the only gauges of economic success, it was deemed necessary to convince «the markets» that the single currency was a realistic project. In this perspective, adopting inflexible targets on deficit and inflation (below 2 percent) was a must. Even if the word «growth» was attached at the last moment to «stability» to soothe offended sensibilities, no one at the time was interested in the real economy, the one that all these numbers tend to obscure. The SGP rules were also important because they covered up all sorts of accounting alchemies, to whom Eurostat, the EU’s statistics service and belatedly the guardian of good fiscal practices, turned a blind eye to at the time in order to allow 11 of the 15 states to squeeze under the 3-percent deficit rule and become the founders of the eurozone, in January 1999. With Europe’s economic growth lagging, a threat of a prolonged recession looming and, even worse, with the combination of a recession and a drop in both liquid and property assets becoming a reality, the Pact is not very useful anymore. In its 2003 budget, France’s new center-right government has kept the deficit at relatively high levels (though still below the 3-percent threshold), while Prime Minister Jean-Pierre Raffarin has proposed not counting defense spending in the calculations of the deficit. He contents that, since France and the UK are bearing the burden of European defense, this must be taken into account in the debate for a redefinition of fiscal balance and the pace at which to achieve it. The Italian government, which will unveil its budget this week, is expected to behave in a similar fashion. Finance Minister Vito Tanzi was arguing a few days ago that public investment on infrastructures and competitiveness-boosting measures should not be included in the deficit calculation. The Portuguese government, which next month will become the first one to be reprimanded under the SGP terms for an excessive deficit (4.1 percent of GDP), would very much like to avoid imposing tough revenue-boosting, deficit-cutting measures. In this respect, it wants the EU to follow Germany’s old «golden rule» which stated that public deficits should be no higher that public investments (which, in Portugal’s case, equal 4.2 percent of GDP). The UK government, which is stealthily preparing its entry into the eurozone, is opposed to the balanced budget requirement even by 2006. To support its case, it reminds the others that the Maastricht Treaty criterion concerning total debt – that it should not exceed 60 percent of GDP – became sufficiently elastic, with «progress toward the desired target» replacing strict adherence, to help countries such as Italy and Belgium enter the eurozone.