Merits of the The Treaty beyond the context of a Referendum

later12

Lets put the referendum aside for one minute, along with the object of being seen to co-operate with Europe and what is referred to as the blackmail clause. And then lets discuss the purely economic merits or demerits of the Treaty on Stability, Co-Ordination and Governance in the EMU on their own values.

In its own right, sustainable fiscal policy is something that I'm sure we can agree is one of our main objectives as an economy. Nobody seriously disputes that.

However, the first issue that must be raised is the concept of placing such serious importance on the idea of a structural deficit. I am sure that by now, people understand the difficulties of measuring structural deficits. Given this difficulty, is it wise or responsible to run the economies of a fragile EMU based on a methodology which is arbitrary, and whose verdicts are practically impossible to confirm or criticise until some years after they are put forward? That is my first point.

Expanding on that, is it wise to put this arrangement in place in an all-together-now manner across Europe? About 23 EMU countries are thought to be running structural deficits. What might be the consequences of front-loading this rule simultaneously across the Economic and Monetary Union? This, according to the German Institute for Macroeconomics & Economic Research:

http://www.boeckler.de/pdf/p_imk_report_71e_2012.pdf

Simulations with the global econometric model of Oxford Economics (OEF model) have shown that consolidation based on the debt criterion would severely impair economic activity in EU countries such as Italy and Belgium, which exhibit particularly high debt ratios, and thus would dampen economic growth in the EU as a whole over many
years.

All is not lost of course. There are strong grounds to be confident that a growth pact will emerge at the June 30th EU and Eurogroup Summit. However, until we know the detail of any growth pact, it will be impossible to comment on it. Therefore, I would be interested to hear the views - of both Yes and No voters - on the economic arguments in favour or against the Treaty on Stability, Co-Ordination and Governance in the EMU.