Les Jones

European Union > EU Relaxes Rules on Deficits

From The Economist:

Germany has breached the pact’s deficit criterion for three years running, and looks likely to do so again this year. Thanks in part to heavy lobbying by the German government, on Sunday Europe’s finance ministers agreed on revisions to the pact which render it effectively toothless. Hard-and-fast rules have been relaxed: now ministers are simply enjoined to keep deficits “close to the reference value”; and the criteria for determining when a country is in a severe economic downturn (in which case it is allowed to exceed the deficit limits) have been revised from the previous, strict standard—a 2% drop in GDP—to include any negative growth, or a protracted period of very low growth.

This will probably be portrayed in some quarters as a sign of the failure of the EU to live up to its original intentions, but deficit financing is an important tool for any government, and the new policy is probably more realistic than the old one.