The new EU “fiscal compact” an intimidation for all people

The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union entered into force yesterday.

The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union entered into force yesterday.

All the major media of the world announced that as from yesterday 1 January 2013 the European Union has a new Treaty on Stability Coordination and Governance, known as “the fiscal compact”, which aims at imposing fiscal discipline in the Eurozone area, plus any other EU country wishing to join.Theoretically, the ultimate goal of the new Treaty is that the euro area avoids in the future a sovereign debt crisis, like the one it faces now. The main enforcing mechanism of fiscal discipline is that national government budgets will be first approved by the Brussels authorities and then introduced in the seventeen Parliaments to be voted.

The Eurozone however was built in the 1990s and functioned after the year 2000 on the almost forgotten today Stability and Growth Pact (SGP), which was a rule-based framework for the coordination of national fiscal policies in the Economic and Monetary Union (EMU), establishing the Eurozone. It was conceived to safeguard sound public finances, an important requirement for EMU to function properly. The SGP contained preventive and a dissuasive arm as the new Treaty does.

Probably with a bit more relaxed limit for the allowed overall fiscal deficits in national budgets set at 3% of the Gross National Product, in contrast with a ceiling of a structural fiscal deficit of 0.5% of the GDP allowed now by the new “fiscal compact”.

What changes with the “compact”?

If one compares though the two upper limits of acceptable public deficits, an overall 3% of GDP in the initial Treaty and a structural 0.5% in the new one, in reality the two do not differ much, in times of recession like now. It depends on what is termed as deficit, because changing the rules you can change and the deficit!. Then what is going on? Do the leaders of the European Union try to fool us all?

Actually the answer to this question is undoubtedly yes, and it’s not difficult to support this argument, if we only recall that it was Angela Merkel’s Germany and Nicola Sarkozy’s France the first two countries to break the rule of 3% fiscal deficit limit.

We should not forget

A huge literature, economic and otherwise was developed towards the mid of the first decade of the physical introduction of the new euro money, against the 3% fiscal deficit limit foreseen by GSP, on the grounds that it was a “straight jacket” or a “fool’s bond”. A large number of economists and politicians were arguing that this limit is catastrophic for growth and so on. At that time everybody was favouring more spending and more borrowing.
The result was that many Eurozone countries and first of all Greece, either openly or by hiding their real deficits, continued to over-borrow in order to finance their overspending. Of course it was Berlin and Paris that had allowed this to happen, profiting from the southerners’ spending. Borrowing was then considered as a “natural” thing for everybody, governments and citizens alike. Then come crisis.

The new Treaty

Coming back to today’s developments, the amendment to the excessive deficit procedure under the new Treaty foresees that the decision-making to punish the culpable country will be more automatic than it was in the past: the euro area member states agree to support the Commission’s recommendations and proposals for Council acts (except where a qualified majority of them are opposed).

In addition, a member state which is subject to an excessive deficit procedure will have to put in place a “budgetary and economic partnership programme”.
The programme will include a detailed description of the structural reforms which the member state will have to implement in order to ensure an effective and durable correction of its deficit.

On top of that the new Treaty also says: “Such programmes will be submitted to the Council and to the Commission for endorsement. Their implementation will be monitored according to the rules of the Stability and Growth Pact”.  What if the culpable country is Germany of France? Will Berlin or Paris accept to be “monitored”? Or they will decide to form a qualified majority to avoid that?

It is more than certain that at the end of the day it will be again a political game, with the usual distortions and extortions. In short as long as the tough fiscal measures and the draconian spending cuts have been imposed on Greece, Portugal and Ireland either the new or the initial Treaty would have done the job, if Germany and France wanted so. The problem is what will happen if the excessive deficit procedure has to be applied to big ones? Will Paris agree to this? Rather no, and probably with the backing of Berlin, because the two of them make or break the rules together.

In short the new Treaty is just an additional intimidation for the three Eurozone countries already under Memorandum, plus Italy and Spain. It seems that in this affair the old and new threats are meant to be used by the major news media and the oppressive mechanisms in every country, to break the willingness of all Peoples to resist the Franco-German ruling elites’ dictums.

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

How to turn a traditional business into a platform-based success

Not much of a help the new EU Directive on pensions

School closures triple in Central and Western Africa as education comes under fire

How can we prepare students for the Fourth Industrial Revolution? 5 lessons from innovative schools around the world

Business is a crucial partner in solving the mental health challenge

Mountains matter, especially if you’re young, UN declares

This farmer used an age-old technique to save his soil and now his farm is prospering

Finnish Presidency outlines priorities to EP committees

This app uses augmented reality to rewrite ‘herstory’

Why feeding the planet doesn’t have to mean sacrificing our forests

Sudan: UN rights chief alarmed over ‘excessive force’, alleged use of live fire against protestors

The European Parliament x-rays the troika’s doings

South Africa’s cabinet is now 50% women for the first time ever

Here’s how we reboot digital trade for the 21st century

‘Still time’ to stop a ‘bloody battle’ for Libya’s capital, insists Guterres

The future of suicide and depression prevention

A backbencher Tory MP threatens both EU and UK with a no-deal Brexit

Every bite of burger boosts harmful greenhouse gases: UN Environment Agency

What does strategy have to do with a platform approach?

Young activists share four ways to create a more inclusive world

World Cancer Day: Early cervical cancer diagnosis could save lives of over 300,000 women

European Citizens’ Initiative: Commission registers ‘Mandatory food labelling Non-Vegetarian / Vegetarian / Vegan’ initiative’

New Syria fighting represents ‘giant powder keg’, warns aid veteran, as he leaves UN stage

Can the next financial crisis be avoided?

Female leaders warn about the erosion of women’s rights

Three ways batteries could power change in the world

Tools of asset development: Renewable Energy Projects case

3 charts that show how attitudes to climate science vary around the world

Education in Emergencies: EU announces record humanitarian funding for 2019 and launches #RaiseYourPencil Campaign

This Brooklyn farm company is training a new generation of urban farmers

Brexit must not put UK university research at risk

Schengen is losing ground fast revealing Europe’s clear inability to deal with migration crisis

State aid: Commission finds Luxembourg gave illegal tax benefits to Engie; has to recover around €120 million

Meet the Seed Warrior: the man on a mission to rescue India’s rice diversity

Eurozone banks are unable to support real economy’s dawning growth

MEPs list conditions for new EU-Azerbaijan deal

The world wide web is 30 years old. What better time to fight for its future?

The importance of Yellow September and suicide prevention in Brazil

Phone lines open between Ethiopia and Eritrea, and people are calling strangers

UN chief appeals to G7 leaders for ‘strong commitment’ and political will to tackle climate emergency

Children are so hungry in one British town they are eating from bins

Can ECB’s €60 billion a month save Eurozone?

Do academia and banks favour a new Middle Ages period?

Yemen: UN envoy asks Security Council for more support ‘to move back’ to the negotiating table

Donors must do more to align development finance with climate goals

Four ways Europe can become a global innovation leader

FROM THE FIELD: Balancing act for Philippines farmers

EU budget: the Common Agricultural Policy beyond 2020

This team of Saudi women designed an award-winning app to make the Hajj safer

Boris ‘single-handed’ threatens mainland Europe; can he afford a no-deal Brexit?

UN chief appeals for calm as Mali presidential election draws to a close

Amazon fires: Health Effects, Near and Far

Why income inequality is bad for the climate

The best companies to work for in 2020, according to Glassdoor

Ukraine’s Poroshenko implicates NATO in his duel with Putin

We need a global convention to end workplace sexual harassment

Joint EU-U.S. statement following the EU-U.S. Justice and Home Affairs Ministerial Meeting

Combat against devastating effects of tobacco can only be won ‘if the UN stands united’ – UN health official

The EU Parliament backs the ‘Right2Water’ initiative all the way through

The ‘yellow vests’ undermined Macron in France and the EU

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s