EU stability pact needs more flexibility: Schmidt
16 March 2005, HAMBURG - Former German Chancellor Helmut Schmidt, both praising and criticising the European Union monetary stability pact, argued for greater flexibility in the pact in order to cope better with current economic realities.
16 March 2005
HAMBURG - Former German Chancellor Helmut Schmidt, both praising and criticising the European Union monetary stability pact, argued for greater flexibility in the pact in order to cope better with current economic realities.
In a comment to appear in the weekly paper Die Zeit appearing on Thursday, Schmidt previewed next week's EU summit meeting in Brussels to review the stability pact, saying it needed revision.
"The European stability pact was formulated during a very good worldwide economic situation," Schmidt wrote of the Maastricht Treaty, first passed in 1992 and followed up by the 1997 Amsterdam Treaty in setting strict budget and national debt limits.
"During an upswing and with rising tax revenues it permits fiscal excesses. But during a downturn it encourages a recession," Schmidt said about the stability pact. "In both cases it unwillingly boosts the cyclical tendencies."
The former West German chancellor (1974-1982) said the stability pact still had its positive side and "should not be dismantled - but it should be applied in a flexible and economically reasonable way".
Looking at the limits setting a three percent ceiling on budget deficits and a 60 percent limit on national debt, both in relation to gross domestic product, Schmidt said: "Taken as such, this is medicine which is of no use. A strict application can even be damaging".
But Schmidt did acknowledge that the stability pact had produced some results, saying it had reined in the excesses in Italy's budget deficit and Belgium's national debt.
Subject: German news