Three point zero equals three point zero. That’s how Germany’s former finance minister Theo Waigel once interpreted the European Union’s Stability and Growth Pact.
Since then, many have mocked the infamous threshold for E.U. members’ nominal budget deficits, measured as the ratio between debt and gross domestic product. The 3-percent figure is said by critics to be arbitrary and inappropriate both to growth potential – on the wane since the financial crisis – and to the extremely low rates of inflation.
And what’s more, almost no one pays attention to it anyway.
But is this really the case? The fact is that 11 of 19 euro-zone countries are adhering to the 3-percent rule. It’s also the case that former crisis countries such as Portugal, Ireland and Spain have been struggling mightily to reduce their debts for years. Those governments take the stability pact seriously.
They’re not the only ones. In Germany, Poland and Latvia a strong political determination also exists to achieve or maintain orderly governmental financing.