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March 21st 2005

EU limits budget deficits

Members of the EU finally reached an agreement that budget deficits should be limited to 3% of national income. Only member nations which use the Euro currency are required to stay within the limit. However, many critics say the statute has little real significance, as a similar agreement has been place for several years. Nonetheless, France and Germany have managed to spend beyond 3% of their respective national incomes in each of the last 3 years. The Euro situation is a sticky one, as member nations are essentially free to conduct independent fiscal policies, but must loosely adhere to a universal monetary policy. In this case, if one nation exercises too much fiscal discretion (runs a large budget deficit) it may have ramifications for the the other member nations. BBC News reports:

The EU is struggling to emerge from an economic slowdown and wanted limits on public spending and debt levels – known as the Stability and Growth Pact – to be made more flexible.

Read More: EU ministers finalize Euro deal

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Posted by Adam Kritzer | in Euro, Politics & Policy | No Comments »

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