Policy paper by Hugo de Sousa
The current economic situation in Europe is worrying. GDP growth for next year has been revised downwards and unemployment has been growing in some countries. The average growth rate estimated for this year is 0.8% and 1.8% in 2003. Moreover, four countries (Germany, France, Italy, Portugal) are facing difficulties keeping their budget deficits below the three percent ceiling and some have even surpassed it (Germany and Portugal). According to forecasts, Germany is likely to have 3.4% deficit next year, Portugal 2.4%, whilst France and Italy are likely to see a rise in their deficits (2.9% for France next year while Italy would reach this value in 2004). However, the current economic downturn should not become the excuse for the elimination or the softening of the stability and growth pact. The pact has some inefficiencies which led to some inconsistency in economic policy management in the Euroland but that should not imply that the stability and growth pact serves no purpose.