Financial Times
January 4, 2012
One week into the new year, and the fragility of southern Europe’s public finances is back in the headlines. Spain’s conservative Popular party-led government, elected in November, says the 2011 budget deficit was at least 8 per cent of gross domestic product – a full 2 percentage points above the target agreed with Spain’s European partners.
This disquieting news seems certain to reinforce the determination of Angela Merkel, Germany’s chancellor, to continue in her role as the eurozone’s high priestess of austerity. Throughout the sovereign debt and financial sector crises of the past two years, she has stuck to the view that bad government housekeeping lies at the root of the turmoil.
As for Spain’s people, they can take comfort in an amendment to their nation’s constitution that appears designed to address Ms Merkel’s concerns. Or can they?
Nothing better illustrates Europe’s grimly legalistic approach to the crisis than its apparent belief that new treaties, laws and regulations – rather than hard cash – will make everything all right. Ms Merkel and Nicolas Sarkozy, France’s president, are making it their mission this year that all 17 eurozone countries should insert a commitment to balanced budgets into their constitutions, or adopt equivalent binding rules.
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