Wall Street Journal
December 16, 2011
European governments will be able to run larger structural deficits if their debt to gross domestic product ratios are "significantly" below 60%, the first draft of an intergovernmental accord on new fiscal rules said Friday.
The text offered no detail on how far below 60% member states would have to keep their debt ratios to benefit from such additional fiscal wiggle room. All other countries would have to keep their structural deficits—the fiscal gap left over once an economy is near full employment—below 0.5% of GDP over the economic cycle.
The text is the first attempt to convert the political deal on tighter fiscal rules reached at last week's European Union summit into a watertight legal accord. The negotiations are expected to continue on the text through January and February.
The text also said the intergovernmental deal will be overseen and enforced by the European Court of Justice. The way that would work is if one country sued another country for not abiding by the rules.
The text said the court's decision in these cases would be "binding."
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