Something Worries Me About Peter Bofinger

Really I realise I have been remiss in another important sense. I have long assumed that in fact the decision to reduce deficits was taken due to the coming fiscal pressure from ageing. This certainly was the background to the discussion. However now I look at the details of the SPG this area is not mentioned (as far as I can see) and the other – the free rider and associated – is the principal consideration.

So those who criticize the bureaucratic and infexible nature of the ECB are in the right to this extent. Of course the underlying demographics *should* be part of the pact, but that is another story.

I find myself in a tricky situation, since I am deeply sceptical that the euro can work, and now after the French vote even more so, but since it has been set in motion, the best thing is obviously to try and make it work (even while doubting). So I am thinking about all this. Obviously I should try and write a longer post making this clearer.

The SGP was adopted at the Amsterdam Council 1997. A history of the implementation of the pact, and a summary of the debate over the new pact can be found here. The Stability and Growth Pact was designed as a framework to prevent inflationary processes at the national level. For this purpose it obliges national governments to follow the simple rule of a balanced budget or a slight surplus.

Now if we go back to the origins of the pact, to the communication of the European Commission on 3 September 2004, you will find the following:

“As regards the debt criterion, the revised Stability and Growth Pact could clarify the basis for assessing the “satisfactory pace” of debt reduction provided for in Article 104(2)(b) of the Treaty. In defining this “satisfactory pace”, account should be taken of the need to bring debt levels back down to prudent levels before demographic ageing has an impact on economic and social developments in Member States. Member States’ initial debt levels and their potential growth levels should also be considered. Annual assessments could be made relative to this reference pace of reduction, taking into account country-specific growth conditions.”

Now curiously I have found nothing in Bofingers argument which seems even to vaguely recognise this background.

A good starting point for this topic would be the conference “Economic and Budgetary Implications of Global Ageing held by the Commission in March 2003.

The European Council in Stockholm of March 2001
agreed that ?the Council should regularly review the
long-term sustainability of public finances, including the
expected strains caused by the demographic changes
ahead. This should be done both under the guidelines
(BEPGs) and in the context of the stability and
convergence programmes.?

This document on the history of EU thinking on ageing and sustainability is incredible.
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Turkey recommended for EU accession talks

The European Commission has recommended that accession talks for Turkey should begin, but hasn’t laid out any dates for the process:

Commission officials are reporting on the progress Turkey has already made, along with Bulgaria and Romania.

The final decision on Turkey rests with the leaders of all 25 EU member states in December – with accession years off.

The Commission’s recommendation is a milestone in an increasingly impassioned debate.

The decision was reached by a “large consensus” among commissioners, one EU official said, but no vote was taken.

There was also no recommended date to start negotiations with Turkey.

More from The Scotsman/PA, EU Business, Reuters and EU Observer.

Update: The full text of Romano Prodi’s speech can be found here and I’ve copied it below, so you can click on the ‘continue reading’ link to see it as the English HTML link on the site doesn’t seem to be working (pdf and doc links are).
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Another Day in Fran?allemagne.

In order to celebrate the 40th anniversary of the Franco-German friendship treaty, on January 22nd the French newspaper Liberation and the German Berliner Zeitung linguistically unified the two countries and created La Fran?allemagne. This Friday, the European Council will witness another day in this beautful country.


Both Chancellor Sch?der and Foriegn Minister Joschka Fischer have to leave the two day Brussels meeting late on Thursday because the German Bundestag is voting on a crucial reform bill this Friday. Their presence in Berlin is indeed important, and most likely not only symbolic: Someone from the SPD’s loony left might need some hand holding in order to avoid a last minute hold up of the coalition’s slim majority, and, of course, the two men need to vote themselves.


As civil servants aren’t allowed to represent their countries in the European Council, Chancellor Schr?der, according to Spiegel Online (in German) and various other news sources, asked French President Jaques Chirac last Sunday to help him out and also take care of German interests in this Friday’s (supposedly not too important) Council meeting. Chirac agreed. German civil servants will only be present just in case urgent need for consultation with the Chancellor should arise.


A French President speaking for Germany… talk about powerful Euro-symbolism.