ECB Calls for "Naming and Shaming" of EMU Budget Violators; Public Warnings, My Goodness!

After years of violating the 3 percent maximum budget deficit restriction as stated in the Maastricht Treaty, Germany is finally a solid citizen.

The Spiegel Online notes German Budget Deficit Plunges to 1 Percent of GDP.

Greece, Portugal, Italy and Spain may hog most of the negative press when it comes to debt in Europe. But Germany too has been in violation of European Union budget rules in recent years, posting a deficit of 4.3 percent of gross domestic product (GDP) in 2010, well above the 3 percent maximum imposed by the Maastricht Treaty.

On Friday, [February 24, 2012] though, Germany's Federal Statistics Office announced that the country's deficit plunged in 2011 and, at 1 percent, is now well within EU limits.

Toot the Horns, Blow the Whistles

Now that Germany has gotten its act together, it's time for "Naming and Shaming" of everyone else.

The Financial Times reports ECB calls for tougher rules on budgets

The European Central Bank has sharpened its hardline stance on eurozone fiscal policy by urging the still-tougher policing of member states’ public finances, including by “naming and shaming” the worst offenders.

Europe’s newly agreed rules provided “the ‘pillars of trust’ between countries”. “This trust is essential for the monetary union,” Mr Draghi told reporters in Frankfurt last week. “In order to continue, the monetary union needs . . . the willingness to be subject to a discipline that cannot be changed by any government whatsoever.”

Among the proposals in the report dated March 7, the ECB suggests the surveillance of countries that run into difficulties in the future should be strengthened by public warnings for the most recalcitrant.

“The threat of publicity, if a member state is unco-operative, may provide an incentive to the member state to take more action,” the report says.

Where a country under surveillance is threatening the eurozone’s financial stability, there should be an automatic recommendation that it seeks financial assistance, the ECB says. It also backs the EU sending a “permanent resident adviser” to countries in difficulties.

Public Warnings, My Goodness!

Obviously these fools do not know how ridiculous they sound and how useless their proposals are. The Maastricht Treaty was useless and the Merkozy Treaty is just more of the same. Moreover, French presidential candidate Francois Hollande (and likely next French president), has vowed to make changes to the treaty.

Spanish prime minister Mariano Rajoy has already announced his own budget target of 5.8% of GDP in 2012, ignoring the EMU mandate of 4.4% on the way to an alleged 3% in 2013. Rest assured 4.4% will not be met, nor will 5.8%.

Last year's deficit was 8.5% and with Spain heading into a monster recession, 7.0% might be a more reasonable expectation for 2012.

"Naming and Shaming" will not do a single bit of good, but it does make for a good song.

Shame, Shame



Link if video does not play: Shame, Shame - Magic Lanterns

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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