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but there is a counter argument that a simple rule like "no more than 3%" is simpler to police (even if only through naming and shaming) and does have some basic logic (given expected gross growth rates, it avoids runaway debt most of the time).

And in that way it did work to a good extent - and thus fulfilled Juncker's claim of the "beginning" of some economic governance in the eurozone.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Feb 12th, 2010 at 03:39:19 PM EST
[ Parent ]
For how many years has Germany been allowed to breach the 60%-GDP debt limit?

The argument is the 3% limit only allowed for a shallow business cycle.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Fri Feb 12th, 2010 at 03:47:58 PM EST
[ Parent ]
Federal-level economic governance is not supposed to be geared towards the good years.

Any moron (except, apparently, Silvio Corruptioni) can manage an economy during the good years. Which is what Bush the Lesser and his friends capitalised on.

But I think that the reference to Corruptioni touches the nub of the issue: The reason we have the GSP is that Germany didn't want to hand Italy the power to run €-denominated deficits indefinitely. And while I can't say I blame them for that, I do think that the solution would be to not include Italy in the €-zone, rather than making up some ad hoc criteria with little connection to reality.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Feb 12th, 2010 at 03:55:05 PM EST
[ Parent ]
But, to include or not include countries in the eurozone is the sort of question that makes the eurozone an excellent free trade area but not really a political union. The reality is that it's still going to be incredibly hard for German or French or any taxpayers to pay for Greek taxpayers, even though that kind of solidarity would seem to be required with a convergence of economies, in a totally integrated union.
by Upstate NY on Fri Feb 12th, 2010 at 06:46:40 PM EST
[ Parent ]
Politically it should be easier to do than for Iceland, Greece actually being in the Euro and all, but somehow I doubt it will be.

I wonder how Germany's treatment of Greece will influence Croatian [just to name the presumed next entrant] feelings about EU accession, and whether Germany cares.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Sat Feb 13th, 2010 at 02:29:42 AM EST
[ Parent ]

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