Read the text below in order to answer questions 21
to 24:
Unpicking the fiscal straitjacket
Never has a straitjacket seemed so ill-fitting or so
insecure. The euro area's "stability and growth pact"
was supposed to stop irresponsible member states
from running excessive budget deficits, defined as 3%
of GDP or more. Chief among the restraints was the
threat of large fines if member governments breached
the limit for three years in a row. For some time now,
no one has seriously believed those restraints would
hold. In the early hours of Tuesday November 25th,
the euro's fiscal straitjacket finally came apart at the
seams.
The pact's fate was sealed over an extended
dinner meeting of the euro area's 12 finance
ministers. They chewed over the sorry fiscal record of
the euro's two largest members, France and
Germany. Both governments ran deficits of more than
3% of GDP last year and will do so again this year.
Both expect to breach the limit for the third time in
2004. Earlier this year, the European Commission,
which policies the pact, agreed to give both countries
an extra year, until 2005, to bring their deficits back
into line. But it also instructed them to revisit their
budget plans for 2004 and make extra cuts. France
was asked to cut its underlying, cyclically adjusted
deficit by a full 1% of GDP, Germany by 0.8%. Both
resisted.
Nov 27th, 2003
The Economist Global Agenda
According to the text, the euro pact