From the FT’s rolling blog:
- Both Sarkozy and Merkel would prefer treaty change for all 27 European Union members. However, if this cannot be reached, they are happy to move forward with a treaty for the 17 eurozone members alone
- The treaty favoured by Sarkozy and Merkel would include automatic sanctions for countries that breach the rule on deficits below 3 per cent of gross domestic product
- Primary tool for enforcing balanced budgets will be a “golden rule” written into the constitutions of all 17 eurozone member states; to be verified by the European Court of Justice…..
Let’s cast our minds back to, say, October 3rd. 1990. An asymmetric shock (re-unification) struck the unsuspecting Bundesrepublik. The deficit, on the Maastricht definition, stayed below 3% until 1994 and then hit, hmmm, 9.5% of GDP in 1995. Gott in Himmel!
The ECJ then pronounced that Germany was liable for ‘automatic sanctions’ and in 1996 ……