Monday, 24 May 2010

EU and eurozone membership paradoxes

The Copenhagen criteria for accession to the European Union require, among other things, democracy. Thus, the EU would not qualify for membership.

According to Eurostat, in 2009 the government deficit in the euro area was 6.3 per cent and government debt at 78.7 per cent of GDP.

Following the financial crisis and the economic downturn, which led to huge bail-outs and high unemployment, the eurozone as a whole wildly overshoots the reference values of 3 per cent and 60 per cent of GDP.

Thus, the eurozone as a whole would fail the convergence criteria of the Stability and Growth Pact for euro introduction, based on the figures for last year.

Here are the main Eurostat findings:

In 2009 the largest government deficits in percentage of GDP were recorded by Ireland (-14.3%), Greece (-13.6%) the United Kingdom (-11.5%), Spain (-11.2%), Portugal (-9.4%), Latvia (-9.0%), Lithuania (-8.9%), Romania (-8.3%), France (-7.5%) and Poland (-7.1%). No Member State registered a government surplus in 2009. The lowest deficits were recorded by Sweden (-0.5%), Luxembourg (-0.7%) and Estonia (-1.7%). In all, 25 Member States recorded a worsening in their government balance relative to GDP in 2009 compared with 2008, and two (Estonia and Malta) an improvement.

At the end of 2009, the lowest ratios of government debt to GDP were recorded in Estonia (7.2%), Luxembourg (14.5%), Bulgaria (14.8%), Romania (23.7%), Lithuania (29.3%) and the Czech Republic (35.4%). Twelve Member States had government debt ratios higher than 60% of GDP in 2009: Italy (115.8%), Greece (115.1%), Belgium (96.7%), Hungary (78.3%), France (77.6%), Portugal (76.8%), Germany (73.2%), Malta (69.1%), the United Kingdom (68.1%), Austria (66.5%), Ireland (64.0%) and the Netherlands (60.9%).

Is there any correlation between both sets of membership criteria?

Ralf Grahn