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There was no reason for Spanish or Greek bonds to cost the same as German ones, and yet they did.
Do I have to remind you of the debt-to-GDP ratios of Germany and Spain over the last 10 years? Let's see. (Eurostat)
      DE    ES
1998  60.3% 64.1%
1999  60.9% 62.3%
2000  60.4% 59.3%
2001  58.8% 55.5%
2002  60.4% 52.5%
2003  63.9% 48.7%
2004  65.7% 46.2%
2005  68.0% 43.0%
2006  67.6% 39.6%
2007  65.0% 36.2%
2008  66.0% 39.7%
2009  73.2% 53.2%
I won't embarrass you with France's numbers. But I will remind you of this
Heads of state and government agreed at the March 2005 Summit to revise the EU's Stability and Growth Pact reform. Under the revised rules, member states must still keep their public deficits under a 3% GDP/deficit ratio and their debts under a 60% GDP/debt ratio.

However, the pact's rules have been made more 'flexible' across a range of areas. For example, member states will avoid an excessive deficit procedure (EDP) if they experience any negative growth at all (previously -2%), can draw on more "relevant factors" to avoid an EDP and will have longer deadlines if they do move into an EDP.

...

In essence, big countries such as France and Germany have won concessions making the pact more 'flexible' in various parts, adding up to a considerable relaxation of the rules. In return, countries such as Austria and Netherlands have won references to "enhanced surveillance, peer support and peer pressure".

The two thresholds - 60% for the debt and 3% for the deficit - remain unchanged.

It's all a farce.

The brainless should not be in banking -- Willem Buiter
by Migeru (migeru at eurotrib dot com) on Thu May 6th, 2010 at 08:36:41 AM EST
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