The Stability and Growth Pact – like a phoenix out of the flames?

Article published on July 15, 2004
community published
Article published on July 15, 2004

This article has not been vetted by an editor at Paris HQ

The European Court of Justice has decided to annul the finance ministers’ decision of last November to exempt France and Germany from sanctions for their budgetary deficits. It is thereby doing Europe a double service.

Up until recently it seemed as if the European Stability and Growth Pact were stumbling towards a long and largely insignificant death. In November 2003, the decision made by Europe’s finance ministers to drop all Commission sanctions against deficit ‘bad-boys’ France and Germany was still capable of provoking wide-spread public interest. The opposition in both countries portrayed their governments as the grave diggers of European stability and even the smaller Member States joined in the chorus of condemnation – albeit somewhat more quietly. Throughout Europe, there was much discussion: about the validity of the “rigid pact” in times of recession, about potential, more flexible forms of the pact, and even about possible sanctions – the ‘tiger’s teeth’- such as fines for contravention. Yet when the finance ministers also granted absolution to debt sinners Italy two weeks ago, only a few commentators (including Fabio de Franceschi in Café Babel) felt it was worth reporting. It seemed as though the final nail in the coffin of the Stability Pact had been hammered in once and for all.

The arrogance of the large countries

That the Stability Pact should at least not die quietly was decided on Tuesday by the European Court of Justice (ECJ). The Council of Ministers’ decision of last November was annulled as it “contravened European law”; a monumental decision, through which the ECJ is doing the EU a double service. Firstly, it is a slap in the face for those large Member States, who, with breathtaking arrogance, had refused to accept the consequences of their casual budgetary policies. Since then, deficit warnings from the Commission have landed on the doorsteps of half the EU Member States. But not one large Member State has received similar warnings, despite repeatedly breaking the rules. Secondly, the judgement means that the Stability Pact will once more become a topic of public discussion. Not only over how useful or useless the pact is - and the pact is the right tool for European stability. But also over the economic relationships that are being passed down to future generations of taxpayers. Being in debt means living beyond your means, to the detriment of tomorrow’s children. This economic adage remains as true as it ever was, no matter whether the economic outlook is good or bad. But that conclusions might actually be drawn from the debate that the ECJ’s judgement has reopened seems almost too much to hope for.