Monday, November 17, 2008

Deficit

A new estimate of the 2008 deficit: 51.4 billion euros, or 2.9% of GDP, which I think is probably based on an estimate of GDP that is too optimistic. So it's quite likely that France will exceed the 3% SGP limit--not that it matters much in the crisis, since the emergency clause is surely operative. Indeed, this estimate ignores any possible stimulus initiatives, to which France is presumably now committed along with other G20 powers. It seems odd even to offer a deficit estimate until a stimulus package has been decided upon, but we've heard little in the way of concrete proposals from the ministry of finance or the president.

3 comments:

bernard said...

the emergency clause is most certainly not operative "de jure" as the Maastricht treaty specified that it would be waived if the economy shrank by 2% or more. It is of course a joke as the relevant articles of the treaty have been conveniently forgotten for over 15 years and with good reason. A good clause would of course have been something like "cyclically adjusted deficits may not exceed a certain threshold". However, such a clause, which most professional politicians already have a hard time understanding themselves, would have been near impossible to explain to populations in simple terms, and cyclically adjusted lends itself as well to controversy in definition. Thus negotiators settled upon an easy to define notion at the time, which they knew to be wrong, and the consequences naturally followed.

Arthur Goldhammer said...

You don't think we'll see a 2% contraction in 2009? Optimist!

bernard said...

Well, I thought we were discussing 2008 ...