Die aktuellen Widersprüche des EU-Stabilitätspaktes

verfasst von Popeye, 23.08.2002, 08:58

-->The case for co-operating
Aug 22nd 2002
From The Economist print edition


Europe's stability and growth pact is producing
perverse results

AS THE River Elbe burst its banks this
month, the German government's budget
deficit threatened to breach the limits of
the euro area's “stability and growth
pact”. The pact prohibits fiscal deficits
above 3% of GDP. Except in severe
recessions, they can attract a fine of up
to 0.5% of GDP. Germany now has a deficit of 2.8%.
This week, Gerhard Schröder, Germany's chancellor,
delayed popular tax cuts in order to be able to
dispense flood aid without violating the pact. With an
election coming up, this is a political embarrassment.
Portugal, which admits to a fiscal deficit in 2001 of
over 4%, already faces the prospect of punishment.
Conceivably, France and Italy may also test the limits
of the pact before long.

A decade ago, the pact's architects, most of them
German, feared that the euro's credibility might be
undermined by fiscal laxity among its members. If a
government's borrowing becomes unsustainable, its
central bank might be forced to bail it out, inflating
away the real value of its debts. Such bail-outs are
expressly forbidden in the euro area, while the
European Central Bank (ECB) enjoys a forbiddingly
strong position relative to national-level fiscal
authorities.

Prudent or not, the euro area's 12 finance ministers
remain accountable for their fiscal choices. If they
court insolvency, financial markets will apply a risk
premium to the government's bonds, or refuse to lend
to them altogether. Why should the European
Commission try to police sovereign borrowing when
the markets already do so? If anything, monetary
union calls for granting more fiscal discretion to
national governments, not less. Having ceded
monetary policy to the centre, member nations have
greater need of fiscal flexibility to cope with problems
that afflict them at home.

Germany is a case in point. If it were still in a
position to conduct its own monetary policy, interest
rates would now almost certainly be lower.
Meanwhile, a weak German economy probably needs
precisely the kind of tax cuts that Mr Schröder was
forced to shelve this week. In other words, the pact's
“excessive deficit procedure” looms large at precisely
the moment it will do most harm. Germany may yet
escape fines, by invoking a special exemption for
events beyond its control—observing the letter, if not
the spirit of the pact.


The pain of solitary punishment

The pact may be flawed, but the euro area still has
fiscal problems which its members need to address.
Between 1990 and 1996, the future euro-area
members ran an average deficit of well over 4% of
GDP. Stronger economic growth, along with the tough
rules of the stability pact, have since forced that
figure down, to 1.5% on average. But now that
“Maastricht fatigue” may be setting in, those deficits
may widen again. Euro-area government debt stands
at 72% of GDP, a deal higher than the 60% figure the
Maastricht treaty deemed sustainable. Many
European governments face hefty pension liabilities
in the near future. If Europeans are serious about
putting their budgets in order, they will need to
undertake long-term fiscal reforms. Is it better that
they do so singly, as and when the pact forces them
to, or together, as part of a collective effort?

Christopher Allsopp and David Vines of Oxford
University, together with Warwick McKibbin of the
Australian National University, argue against going it
alone*. Budget cuts are never painless, but within a
monetary union individual cuts can be excruciating. A
country with an autonomous monetary policy can
offset tighter fiscal policy by expanding credit and
devaluing the exchange rate. But in a monetary
union, where an individual country can no longer cut
interest rates, nothing cushions the blow.

The authors asked what would happen if France were
to cut its budget deficit unilaterally, by 2% of GDP.
According to their simulation, French output would
fall by more than 2%. Prices would fall a bit in
France, but across the euro area as a whole they
would barely change. So the ECB would have little
cause to cut nominal interest rates. As a result, the
real rate of interest—nominal rates adjusted for
inflation—would actually rise in France. Output would
eventually recover, but not before a recession of up
to three years.

What if France agreed with the other member states
to cut deficits together? Surely, a synchronised
contraction would be even more damaging, as each
country's recession spilled over into its neighbours'
economies. Possibly, the authors acknowledge. Yet,
while the ECB might not respond to a slowdown in
one country, fiscal austerity in all 12 euro countries
would probably force it to cut rates, so bolstering
private spending even as government spending falls.
A rate cut would also weaken the euro, boosting
exports.

Investors might provide another cushion. Collectively,
the euro area accounts for a big share of the demand
for global savings. As they reduced their claims on
these savings, Europe's governments would take
pressure off the world's long-term real interest rates,
boosting share prices and “crowding in” private-sector
investment.

If fiscal reforms are undertaken jointly, the
short-term sacrifices may be surprisingly light, and
the long-term benefits may arrive surprisingly early.
Such a happy outcome hangs upon pursuing reforms
that are both credible and co-operative. It is a pity,
then, that Europe's stability and growth pact, as it
stands, is neither.
Quelle: Economist vom 22.8.02

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• Die aktuellen Widersprüche des EU-Stabilitätspaktes - Popeye, 23.08.2002, 08:58