Photo: mollypop via Flickr
It’s well known that Eurozone governments frequently disregarded budget restrictions as outlined by the Stability and Growth Pact.Yet it turns out that flaunting of budget rules was literally the norm.
With Greece’s debt crisis now exposing the weakness of fiscal oversight in the 16-nation economy, governments missed one or both of the European Union’s two budget requirements 57 per cent of the time since they adopted the euro. Those rules limit debt to 60 per cent of gross domestic product and budget deficits to 3 per cent of GDP, as set out in the 1997 Stability and Growth Pact.
There’s a long way to go to bring this under control. For starters, the Eurozone needs to simply have its rules followed more often than not. It’s hard to see how nations can be forced to regularly follow budget rules within a short period of time. The adjustment would be too sudden and harsh for populations to bear. In many nations they’ll protest or riot and push out politicians trying to make the hard adjustments.