From the new-fangled EU fiscal compact declaration:
5. The rules governing the Excessive Deficit Procedure (Article 126 of the TFEU) will be reinforced for euro area Member States. As soon as a Member State is recognised to be in breach of the 3% ceiling by the Commission, there will be automatic consequences unless a qualified majority of euro area Member States is opposed. Steps and sanctions proposed or recommended by the Commission will be adopted unless a qualified majority of the euro area Member States is opposed. The specification of the debt criterion in terms of a numerical benchmark for debt reduction (1/20 rule) for Member States with a government debt in excess of 60% needs to be enshrined in the new provisions.
Now, its been pointed out repeatedly that even Germany has struggled to stay below the Maastricht thresholds. But these two tables from Eurostat, reproduced by Macro Business (h/t Yves Smith) really hammer the point home.
What was supposedly agreed in Europe on Friday just ain’t gonna happen.
And you might want to check out what countries would have to do to comply with the compact’s requirement to get structural deficits down below 0.5 per cent of GDP. (And also to reduce debt to GDP annually by — deep breath — one-twentieth of the difference between their current debt to GDP and the Maastricht 60 per cent target). Here’s a chart via Societe Generale’s James Nixon:
Additional reporting by Joseph Cotterill
Related links:
A sub-optimal solution to the Euromess – FT Alphaville
What is a (Eurozone) “structural deficit”, again? – Nick Rowe