The most recent UK figures on debt and deficit come as part of the UK’s reporting to the EU on these important matters. We are reminded in the official communication that
“The Protocol (to the Maastricht Treaty) on the excessive deficit procedure defines two criteria and reference values with which member states should comply. These are a deficit (net borrowing)to GDP ratio of 3% and a debt to GDP ratio of 60% ”
The latest EU reports show that 14 member states still exceed the 3% control on budget deficits, and 16 remain with debt over 60% of their GDP. Some are way beyond the targets. Italy and Portugal have debts at more than 130% of GDP. Spain and the UK remain well above a 3% deficit target amongst the larger EU countries.
The total Euro area has a debt to GDP ratio of 92%, and the EU 28 a ratio of 86.8%. The Euro area as a whole has now got its deficit down below 3%. The UK in the year to March 2015 ran a deficit of 5.1%.
I read that the left of centre parties who won the Portuguese election have not been allowed to take office because they have dared to challenge the Euro disciplines. The Euro once again overrides democracy.
One of the main arguments in the Euro area is when and how will the Maastricht criteria be enforced? All the talk of a Euro Treasury follows hard on the introduction of the so called EU semester, an attempt to intensify the reporting and the pressure to conform with the required controls on debt and deficit. It is difficult to run a single currency without imposing a strong discipline on total government borrowings in the single currency area. Surplus countries dislike borrowing countries attempting to free ride at lower interest rates based on their prudence. Borrowing countries resent the tight controls on their borrowing the surplus countries wish to establish. So far the Maastricht criteria have not been observed by a majority of states. They are nonetheless an important constraint on worse performance, and they are now once again in the centre of the argument about establishing a Euro Treasury.
Meanwhile it is difficult to see why the UK has to report its debt and deficit to the EU at all, when successive governments clearly have no wish to hit the EU targets, and when there are rightly no penalties for failure to do so. The most recent figures show the UK deficit gradually reducing, with tax revenues growing more quickly than the growth in public spending, as planned.
What is curious is that the left wing UK parties in the UK who thunder against “austerity” by which they mean cuts and controls on public spending and borrowing never fulminate against the more intense public sector austerity the EU requires under its Maastricht criteria. Why do they not spend some time and energy trying to change that?