Twenty-five out of 27 EU countries (all bar the UK and the Czech Republic) have now signed a pact designed to impose more fiscal discipline in their countries. As the Daily Telegraph notes, all 25 “are to write a golden rule on balanced budgets into national constitutions or equivalent laws and automatic correction mechanisms if the rule is breached.”
The devil will be in the details, the enforcement mechanisms, the ratification process (for example, there’s going to be a referendum in Ireland), the upcoming French election, and (over the longer term) in the tricky fact that such a pact could well be poison for a country trapped in a currency for which it simply is not suited.
And here’s an early sign of trouble from a Spanish prime minister surprisingly unworried by the dethroning of Messrs Berlusconi and Papandreou:
Mariano Rajoy, prime minister of Spain, said the budget deficit would be 5.8pc of GDP in 2012 – more than 30pc higher than the 4.4pc target agreed by Brussels.
In a move that was heralded in Spain as defiance against the German-led austerity drive, Mr Rajoy said he had decided to set a new target rather than extract €44bn (£36.6bn) from the budget at a time of economic crisis. Mr Rajoy said it was now a “sensible and reasonable” target. “This is a sovereign decision made by Spaniards,” he said.
Spain’s appeals to Brussels to relax the targets have been rebuffed in recent days. The European Commission has reportedly insisted on investigating the reasons for Spain missing its previous targets first.
At the EU summit in Brussels this week, leaders said the targets were non-negotiable. Swedish Prime Minister Frederik Reinfeldt said: “The first thing that we do after the new rules [on budget stability] should not be to relax them.”
Mr Rajoy insisted the slippage was just on an interim target and Spain would still honour its commitment to bringing its deficit down to 3pc of GDP by 2013. But the announcement was seen as rebuffing other European leaders since the figures do not have to be confirmed until April.
Over at EU Referendum, Richard North hazards a guess as to what lies ahead over the next few months:
The current strategy is to flood the PIIS (PIIGS minus Greece) with money, and to isolate the Greek economy, prior to cutting the country adrift in the autumn, when the spin will be focused on the new rescue plan which will restore Greece to economic prosperity.
Gradually, the pieces are falling into place and, if the euro can survive past the summer, my gut feeling is that they might just get away with it for the time being. And, for the “colleagues” [those sterring the EU project], that is all that really matters. Tomorrow is always another day.
That’s not implausible. The wild cards remain the same, both political (within the individual countries of the EU) and economic, notably in Portugal, teetering towards the edge, and in Greece, now in full Icarus.