Wednesday, August 14, 2002

Neither a Borrower Nor a Lender Be

Yet more bad news for the Europeans. Back in June Portugal released figures showing its national budget deficit had reached 3.85% of GDP. This caused mild concern at the time, because according to the European Union Growth and Stability Pact no EU country can run a budget deficit exceeding 3% of GDP. The result for tiny Portugal was a reprimand from the European Commission along with the threat that financial penalties would be assessed against the government in Lisbon.

The problem didn't appear too grave though as it only involved weak Portugal, not the big European players. Today, however, things are beginning to look more worrisome. Now the large nations are flirting with surpassing the hallowed 3% mark. Germany, France and Italy all appear set to break the barrier which could cause some serious strife for the EU. If the EU sticks to its guns and reprimands the big three the way it scolded Portugal, it won't go over too well with their national governments. And considering that a majority of Germans now want to return to the Deutsch Mark, believing the Euro currency has caused inflated prices already, any effort to chastize Germans won't win Brussels any friends in Berlin.

The other option is to alter the Growth and Stability Pact, which might be quite a task taking into account the difficulties the EU has in agreeing on these things in the first place. And if it appears that EU treaties only come up for reforms when the big players are having problems, the smaller nations will certainly see a double-standard at work.

But the bigger problem is that the wind is going out of the EU sails. After the euphoria surrounding the "successful" introduction of the common currency into circulation at the beginning of 2002, things are going downhill. The EU crowd hoped that successful economic union would lead to successful political union and EU expansion. But with economic union running into problems, political union and expansion are starting to look doubtful. Of course this won't stop the Eurocrats. They'll just keep stumbling along, spouting clich├ęs about European values and integration from their bunkers in Brussels.


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