One problem with the Maastricht’s criteria, the Eurozone’s fiscal rules, was certainly the lack of enforcement , with an acquiescent Eurostat standing idly as the perimeter Public Administration was shrunk, and more and more expenditures and debt were reclassified as non-public.
Enforcement is done by people, who are naturally subject to various influences, and no one had any incentives to look at the growing debt icebergs as Governments borrowed off-budget. Even the rating agencies and creditor seemed to have their "debt sonars" turned off.
But the more critical issue is that the poorly designed Maastricht criteria focused attention only on the intermediate and instrumental targets, the domestic fiscal deficit, rather than on the true ultimate goal, the current account balance. Worse than defining objectives is to establish the wrong objectives.
External imbalances were ignored because it was convenient to believe that intra-Eurozone trade imbalances could be financed forever. In fact, having put aside the normal adjustment tools, the Single Market and the Single Currency make balanced external accounts all the more imperative. But even in mid-2011, many continue to believe in this Single Curency illusion, and its collarary that trade surplus countries need do nothing to participate in the “intra-Eurozone external adjustments”, which are seen as wholly the responsibiliity of trade deficit countries.
These fragile Eurozone economies are now being asked to do all the work necessary for the intra-Eurozone CAB adjustments, without the benefit of any of the usual balance of payments adjustment tools.
Economic midgets with their policy hands tied behind their back playing trade volleyball against economic giants.
It is not going to work.
Mariana Abrantes de Sousa
Artigo de Helena Garrido, Jornal de Negócios
It's the total external debt, stupid
Balança comercial agrava-se
This time is different
The Portuguese Economy: Portugal’s bailout: reinventing the wheel