No surprise this, but Britain looks set to be locked out of the Euro club by official Maastricht criteria. From the FT:
Alistair Darling on Wednesday unveiled plans to tax the rich and rein in public spending as he confirmed a huge increase in borrowing to restore the public finances, which are in their worst state since the second world war. …
The increased public spending, combined with weakening tax revenues, would mean that public sector net debt would almost double to 79 per cent of national income by 2013. After that it is expected to stabilise and then start to fall only from 2015-16.
Maastricht convergence criteria are the economic standards European Union member states have to meet to adopt the Euro. They’re meant to help protect current members of the currency union from inflation and other financial hazards potentially exported from new, more licentious members.
One of the criteria requires government debt to GDP not exceed 60 per cent. Additionally, Eurozone wannabe-members’ government deficit to GDP ratio isn’t supposed to exceed 3 per cent. UK Chancellor of the Exchequer Darling said in his Budget report that it’s going up to 12.4 per cent this year.
And it’s not just Maastricht criteria the UK is flouting, but Darling’s own ‘sustainable investment rule‘ set out in 2007, which recommended net debt not exceed 40 per cent of GDP. Last time we checked (late 2008) it was already above that at something like 44 per cent.
Of course lots has changed since then, extremis malis extrema remedia etc.
Also, if the UK were actually seeking to join the Eurozone, the Maastricht criteria do have a degree of flexibility about them, (in fact, larger Euro member states have been known to ostentatiously exceed them) but the above is a good illustration of the extent to which the UK is veering away from previous norms and targets.
Related links:
Breaking the rules – FT Alphaville
Not so Maastricht – FT