Creative Austerity

The chief current problems for Europe, apart from possible decisions bearing on the Schengen Treaty and its costs, concern compliance with the rules on the government budget deficit (3 per cent of GDP) and the public debt (60 per cent). The annual budget constraint is attenuated by the possibility of flexible application for individual members, while the debt limit is harshened by the Fiscal Compact, which requires members to bring the ratio down below the 60 per cent threshold within 20 years. The Italian government’s recent critical stance on a European Monetary Union more concerned with budgetary rigor, measured in percentage points, than with growth, gauged by more jobs and higher living standards, constitutes an important stimulus for rethinking the institutional architecture of the treaties and regulations in force. The premises for the euro highlight the problems and constraints that would plague its proper implementation.