Wednesday, May 15, 2013
Inside the Paris-Brussels Accord
The EU recently granted France a two-year respite in its drive to reduce the budget deficit to 3% of GDP. How did this come about? Le Monde has a very interesting background piece today. It reports that the steady French push for more pro-growth measures since Hollande's election met with backing from, most notably, the IMF, Barack Obama, and even European Commission experts, all of whom argued that a further recession in France (now confirmed by the latest statistics) would be more harmful to European prospects than continued depression in smaller economies. The main opposition came from the staffs of Rehn and Barroso, who argued that such a double standard (lenience for big countries, harsh austerity for smaller ones and even for the large southern neighbors Italy and Spain) would spark political difficulties. It seems that the outbursts against Germany by several Socialist Party figures also helped persuade the EC that something had to give.