Euro Zone Debt Rules Need an Urgent Overhaul
With the EU economy on the upswing, it’s time to remake the fiscal rules that caused so much misery in the past.
Time for the EU to fix the roof — and get its house in order.
Photographer: Archive Photos/Archive PhotosFix that roof while the sun is shining. That’s good advice for the European Union too. As the euro-area economy recovers strongly from the pandemic, it's the perfect opportunity to change the community’s fiscal rules.
It was most welcome to read a research paper from the European Stability Mechanism, the EU's bailout vehicle, that actually proposes some radical changes. Unfortunately, it doesn't go far enough. So while the ESM's suggestion to lift the debt ceiling from 60% to 100% of gross domestic product is a logical move — after all the debt loads of both the U.S. and the U.K. are in this territory — it solves nothing. Especially as it recommends keeping the deficit criteria at 3%: Reality check fail.