SIR Recently, I proposed to Ecofin, the council of European
finance ministers, that eurozone budgetary constraints should
apply to the aggregate deficit in the area rather than to each
country (What convergence?,
December 7th). The reported Dutch response, that profligates
would be freeriding on the backs of more frugal
countries, neglects the essence of my proposal. This is
that deficits should be treated like pollution, with rights to
spend being transferable across countries without prejudice for
the total amount of deficit.
In 2001, the overall eurozone deficit was only 1.1% of
GDP, which is what matters for the stability of the euro. You
say that my words would carry more weight if Polands
awesome budget deficit was itself designed to stimulate economic
growth. For the record, the 2003 deficit will be only 3.9%
of GDP; it is falling and on course for convergence with the Maastricht
reąuirements in time for Polands earliest possible entry
into the EMU. That our deficit is indeed a stimulus to growth
is proven by Polands current pace of growth, which is already
exceeding 2% and is heading for 3.5% in 2003. All the other Maastricht
conditions have been met from public debt to inflation,
from exchangerate stability to interestrate ceilings.
Here Poland is not just converging, it is already there.