Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Precisely. The only substantial flaw with the cap on the structural deficit is the fact that they will almost certainly define the full employment point in a NAIRU sense and so will massively understate the structural GDP at "full employment" by massively understating what full employment really is.

But the only way to square the 3% structural plus cyclical deficit cap at the sub-sovereign level is for some system of providing grants from the economic sovereign level to the sub-sovereign level, eg, the EU issues grants to the members in proportion to population equal to 25% of the excess of the EU wide output gap over 5% of EU GDP.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Dec 19th, 2011 at 02:22:38 PM EST
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