Tuesday, May 28, 2013

28/5/2013: EU Looks Into Bending Rules... Again...


Spiegel [http://www.spiegel.de/wirtschaft/soziales/vorschlag-der-eu-kommission-deutschland-kaempft-um-den-sparkurs-a-902198.html] reports that the EU Commission, as a part of a planned shift in the policy focus from austerity to structural reforms, will consider altering accounting rules per classification of fiscal deficits. The idea is that member states will be allowed to exempting certain types of government spending from the deficit calculations.

How this will work? Ok, insolvent state, like, say Greece, can borrow (somewhere) EUR X billion to use as a backing for its 50% share in matching EU Structural funds, thus raising EUR 2X billion for investment. The EU will then allow Greek Government to classify EUR X billion borrowings as aquarium fish and not deficit nor debt.

So
(1) EU thinks it is a grand idea to hide even more debt and deficit under the proverbial rug of 'accounting rules' bent to suit EU; and
(2) EU thinks that 'structural funds' deployment will be sufficient to 'stimulate' euro area economies out of structural balance sheet recession.

I suggest they (a) read up on why honesty and transparency matter in fiscal accounting and (b) read up on what happened in Japan where a stimulus ca 100 times larger than 'structural funds' one was applied to no avail.

Then again, the EU might also change the rules on reading, so the inconvenient reality does never interfere with the dreamy Enronising…
Post a Comment