The public deficit and debt have soared in the EU as governments have massively backed their economies to mitigate the impacts of the pandemic, Eurostat said in a new publication at the end of April. Among other striking figures, public debt in the euro area has reached 98% of GDP, the European statistics agency noted. Eurostat reported: “In the euro area, the ratio of public debt to GDP fell from 83.9% at the end of 2019 to 98.0% at the end of 2020, and in the EU from 77.5% to 90.7% .
“In the euro area, the government deficit to GDP ratio fell from 0.6% in 2019 to 7.2% in 2020, and in the EU from 0.5% to 6.9%.”
Greece, which was still reeling from its sovereign debt crisis, had the highest debt in the bloc relative to the size of its economy.
It was followed by Italy, Portugal, Spain, Cyprus, France and Belgium.
Spain, Malta, Greece and Italy have the highest deficits.
While many fear the end of the eurozone is near, unearthed reports reveal how the euro could be in a better position without France and Germany.
Arguably, it was not the behavior of members of the southern euro zone that plunged the single currency into crisis in 2008.
There was, from the start, a way for the EU to control the economies of member states by following the rules that had been set for the single currency in the Maastricht Treaty.
It was called the Stability and Growth Pact, and it wasn’t Italy or Greece that torpedoed it, but Germany and France.
By 2003, Paris and Berlin had both exceeded spending and their budget deficits had exceeded the 3% of GDP limit they were legally required to meet.
The Commission – then headed by former Italian Prime Minister Romano Prodi – had the power to fine them.
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However, finance ministers from what were then the 15 euro area member states met in Brussels and voted against the Commission.
They voted not to apply the rules to which they had subscribed and which aimed to protect the stability of the single currency.
British Chancellor at the time, Gordon Brown, voted with the French and German position.
Mr Prodi told the BBC in 2014: “Obviously I didn’t have enough power.
“I tried and they [the finance ministers] told me to shut up. “
Jacques Lafitte, an official with France’s finance ministry, said technocrats working on the project knew that a central mechanism was needed to ensure member governments comply with the rules.
She said: “We made a number of suggestions to Member States at the time.
“But these were all rejected, as they would have involved the transfer of sovereignty from national governments to Brussels or perhaps Frankfurt.
“We knew it deeply. Again, we couldn’t say it publicly.
“We were just simple technocrats. We were supposed to shut up and listen to member states who, almost by definition, knew best. I was convinced that was not enough.”
Sir John Grant was British Ambassador to the EU at the meeting of finance ministers.
He said: “The credibility of the Commission and the willingness of Member States to accept the authority of the Commission as an independent applicator of the Maastricht criteria has clearly been seriously compromised.
It was also a signal for everyone in Europe.
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Former Greek Deputy Finance Minister Peter Doukas recalled: “The idea was, okay, if the big boys don’t adhere and discipline themselves, they’ll be more relaxed in the application of the treaty. [on us].
“I mean, no one can impose sanctions on Germany and France.
“These are the European superpowers. So they will not join.
“The pressure just wasn’t there.”
Speaking at the Delphi Economic Forum in Greece in 2017, former Italian Prime Minister Mario Monti also blamed the eurozone crisis on Germany and France.
He said: “It was caused by the two most revered parents of the euro, Germany and France, who in 2003 did not respect the Stability Pact.
“Neither the Prodi Commission imposed sanctions on the two countries, nor the Council of the EU wanted to do so.”
In a report for the University of Erlangen titled “The Euro Crisis – Causes and Symptoms”, author Christoph S. Weber wrote in 2015: “Over the past 14 years, several countries have failed met the public deficit criterion, some on several occasions.
“However, the Maastricht deficit procedure, which imposes fines on sinful countries, has not always been implemented. In 2002 and 2003, France and Germany recorded too high deficits, but forced their euro area partners to waive sanctions.
“This fatally weakened the legal framework of the Maastricht Treaty.
“So the Maastricht criteria are just recommendations, not demands.
“The treaty also included a no-bailout clause, which means that member countries will not be responsible for the debt of other countries.
“The idea that the founders of the euro had – that the criteria would be a benchmark that all members would strive to meet and that the no-bailout clause would prevent the assumption of debt – turned out to be a blue sky thought. “
It was the French war hero and later President Charles de Gaulle who told German Chancellor Konrad Adenauer in 1963 that “Europe is France and Germany; the rest are just garnishes ”.
More than half a century later, General de Gaulle’s comment is still relevant today.
It was German Chancellor Angela Merkel and French President Emmanuel Macron who came up with the idea this summer for a huge recovery plan against coronaviruses, otherwise known as the stimulus fund.
The € 750 billion (£ 668 billion) fund will be used in the form of loans and grants to countries hardest hit by the virus.
The remaining money represents the EU budget for the next seven years and has been described as the first step towards “a fiscal union”.