Debt and deficit in Europe

Council and European Council meetings have proliferated substantially. Discussions and deliberations on the financial and economic crisis are never ending.

The eurozone has regrettably become a region for transfer of monies from loaded countries to pitiable states- Joseph Cuschieri

Following the coming into force of the Lisbon Treaty and the onset of the economic and financial crisis, the workload of the European Parliament has increased significantly. The economic and financial crisis has become the everyday agony of the European institutions and of the EU heads of state and government.

The economic and financial crisis has occasioned austerity measures in almost all European countries, the brunt of which is in fact being borne by none other than the European workers and citizens.

The Maastricht criteria, agreed upon in 1992, clearly defined the conditions to be met for the adoption of the euro. The agreement was crystal clear with regard to the inflation rate, annual government deficit, government debt, exchange rates and long-term interest rates.

Article 121 of the then EC Treaty, now article 141 of The Treaty on the Functioning of the European Union, established the sustainability of the government financial position as one of the convergence criteria. Such sustainability is defined in terms of a budgetary position without an excessive deficit.

Protocols 12 and 13 of the consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union respectively deal with the excessive deficit procedure and the convergence criteria. The annual public deficit must not exceed the three per cent reference value of the GDP and the ratio of government debt to gross domestic product must not exceed the 60 per cent reference value.

The above-mentioned reference values are set out in the EU’s primary legislation. Yet, despite such enshrinement, in 2012 – 20 years later - the economy and budgetary positions of many member states are in a mess.

According to official indicators in the euro area, government debt stands at 87.4 peer cent while government deficit stands at 6.2 per cent. Something went wrong.

There is a view that the spiralling deficit and debt in the eurozone countries is not due to the lack of government fiscal discipline but, rather, are the result of the global financial recession that lead to European countries rescuing banks and coming to their aid. However, there are countries, like Greece and Italy, whose lack of fiscal discipline was shocking.

The eurozone has regrettably become a region for transfer of monies from loaded countries to pitiable states. Is this the EU that (Nationalist MEP) Simon Busuttil had fervently portrayed prior to Malta joining the EU?

In 2012, the EU heads of state and government are revisiting 1992. During an “informal” summit a few days ago, they went back to the drawing board and found comfort once again in producing a new treaty that should, in this case, provide for fiscal discipline and convergence. If the fiscal compact as agreed upon is as “informal” as the summit’s description, then something is bound to go wrong again.

Incidentally, article 16 of the new Treaty on Stability, Coordination and Governance in the Economic and Monetary Union prepares us to embrace such an eventuality because it provides for “an assessment of the experience” with the treaty implementation.

The only way to avoid a negative experience is to focus on social inclusion, growth and jobs and recognise the simple fact that, while living beyond one’s means is an option in life, such a modus vivendi is doomed to outright failure. The Aristotelian mean, as far as I know, has always been, recommendable.

joseph.cuschieri@europarl.europa.eu

The author is a Labour member of the European Parliament.