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To: EL KABONG!!! who wrote (36127)	7/15/2003 11:38:25 PM
From: EL KABONG!!!	Respond to of 74559

The little European countries versus the big European countries... The big dogs made the rules to favor, well big dogs, but now that their own economies resemble Alpo, the German shepherds and other big dogs want the rules changed. Will the little dogs need bigger pooper scoopers??? Who knows? online.wsj.com France to Exceed Deficit Limit Of Euro-Zone Pact -- Again By CHRISTOPHER RHOADS Staff Reporter of THE WALL STREET JOURNAL BERLIN -- The fissure in Europe over whether to enforce budget-deficit caps deepened Tuesday, as France admitted that its deficit next year will likely exceed the 3% limit for a third year in a row, according to European Union finance officials. Worsening budget deficits in France and Germany are fast shaping up as the first serious test for Europe's four-year-old common-currency project, and have created a split between nations on how to address the problem. France's admission prompted calls ranging from sanctions against Paris to loosening the euro's fiscal rules. U.S. Treasury Secretary John Snow even weighed in, saying he backed French President Jacques Chirac's call for a discussion on whether to temporarily suspend the euro zone's Stability and Growth Pact in order to pursue economic growth. After a meeting with financial officials in London, Mr. Snow said, "I think the notion of fixed rules in economic policy is generally not all that advisable." He added that there is virtue in fiscal responsibility, but there are times when a higher deficit should be allowed. The stability pact -- the chief fiscal underpinning of the euro -- requires member countries to bring their budgets close to balance within a few years and imposes massive fines on countries whose deficits exceed 3% of gross domestic product. Germany already has said it is likely to exceed the 3% deficit limit this year, as well. That Europe's two largest economies -- and the chief architects of the stability pact -- are overlooking the rules creates a dilemma for the euro zone, even as the euro itself has gained ground and credibility in the past year against other major currencies. The stakes for Europe are huge. If countries are allowed to pursue their own economic policies, it could ultimately undermine the euro project itself, some warn. "We cannot start running and allowing deficits" in the euro area, said Hugo de Sousa, an economist at Notre Europe, a Paris-based think tank. "That could lead to a collapse of the single currency." As Germany sinks into recession and France's economy weakens, both countries want to stimulate growth with tax cuts and spending increases. Such measures for the past several years have helped the U.S. boost its own economic recovery this year. But many smaller European countries, which have largely balanced their budgets in recent years, want the larger countries to play by the rules. Some are calling for the fines countenanced by the pact to be imposed. Just the debate itself, said Karl-Heinz Grasser, Austria's finance minister, "damages the credibility of our finance and economic policy." If France violates the limit for a third year, he added, "sanctions must be the consequence." The differing views on how best to solve the problem are driving cracks in the concept of a united economic bloc. "Political leadership is needed but is sadly lacking -- with the result that national interests have moved back to the fore," said Juergen Stark, vice president of the Bundesbank and Germany's lead negotiator in creating the euro, in a recent speech. Many countries in the euro zone concede that some rule changes are required, but some are frustrated that the pressure for change is coming only now when countries have already run into difficulties. "It's like with the Ten Commandments," said Irish Finance Minister Charlie McCreevy. "Everybody knows they should abide by it, but everybody is a sinner." The strains weighing on the euro zone in trying to comply with its fiscal rules in the midst of the global economic downturn contrast starkly with conditions in the U.S., where the Bush administration has opened the fiscal spigots. Since 2001, the U.S. government has injected in the economy a fiscal stimulus -- via both tax cuts and spending -- equal to almost 4% of GDP, the biggest such infusion in U.S. history, according to John Lipsky, chief global economist of J.P. Morgan in New York. The fiscal expansion in the early years of the Reagan administration in the 1980s was less than half that, he said. The U.S. deficit this year is expected to exceed 4% of GDP. That support, combined with monetary easing by the Federal Reserve, has helped to put the U.S. economy on much firmer footing than that of the euro zone. The U.S. economy is expected to grow by 2.3% this year, and 3.6% next year, according to Consensus Economics Inc., a London research firm. The euro area is expected to grow by 0.7% this year, and 1.8% next. But the U.S. has had more room to juice the economy because it entered the economic downturn with a huge surplus. Much of Europe still had a deficit at the time, which has made complying with the stability pact's deficit rules all the more damaging in the downturn and gives the euro zone little maneuvering room. Write to Christopher Rhoads at christopher.rhoads@wsj.com Updated July 15, 2003 7:33 p.m. KJC