In their meeting last Monday, German Chancellor Angela Merkel and French President Nicolas Sarkozy proposed automatic sanctions on countries in the euro zone that have fiscal deficits of more than 3% of their gross domestic product (GDP). Which are these countries?
The chart shows the fiscal deficits of 15 countries that use the euro as their currency. The data and the forecasts are from the Organisation for Economic Co-operation and Development (OECD) and do not include data on Cyprus and Malta, the two other countries that also use the euro. Notice that most countries, including France and Spain, are projected to have fiscal deficits lower than 3% by 2013. Germany’s deficit is already very low.
French President Nicolas Sarkozy (L) and German Chancellor Angela Merkel. Photo: Reuters
Sarkozy had also said that while he would like the new treaty to be adopted by all the 27 European Union member states, if not he would be quite happy for it to be adopted by the 17 countries that use the euro. That was perhaps a reference to the UK, which, according to the OECD data, is projected to have a fiscal deficit of 9.4% this year, to be trimmed to 7.4% by 2013.
The question, however, is: What would the fiscal compression do to growth in the euro area? Contrast the US, whose deficit, as per OECD, is projected at 8.3% in 2013.
Also See | Chart of the day (PDF)
PDF by Sandeep Bhatnagar/Mint