Stupidity pact broken, no-one seems to care…
November 27th, 2003France and Germany have broken the EU Growth and Stability pact by running up budget deficits greater than 3% GDP. Normally they would be fined for this. but the other member states have decided to be lenient. The move is ironic, as the pact was drawn up by er…Germany as a way of imposing it’s inflation-obsessed Bundesbank policies on the rest of Europe.
Although the French and Germans are being cheeky, it may be a good thing. The growth and stability pact (or the ’stupidity pact’ according to Romano Prodi) is far too inflation-focused and restricts governments’ abilities to recover from recession. Much like the disastrous policies the IMF have inflicted on developing countries (as excellently written about by Joseph Stiglitz) in the name of ‘globalization’, the pact is hurting European economies in recession. Meanwhile, the more balanced, prudent in good times, invest in bad times policy of Gordon Brown’s, which has got envious looks from across the Channel, is coping better. An excellent article in today’s Guardian sums up the futility of the pact and an assessment of its future. The break means it is a good time to ditch the pact, but the Guardian’s economics editor predicts we’re heading for a fudged compromise. A pity, especially as the pact’s removal would clear a big obstacle for Britain’s Euro entry…