Government debt and expenditure remain stubbornly high, and Italy has been repeatedly rapped on the knuckles by Brussels for failing to keep within the parameters of the Euro stability pact.
The British fear that, if they ever joined the euro, the pact might hinder plans to put extra cash into public services.
That is why the euro area needs a pact that is better at co-ordinating budgetary policies than the flawed arrangement in place.
Faced with an opportunity last December to wring concessions out of Brussels in return for supporting the euro-zone Fiscal Pact, he opted to make highly technical, apparently innocuous but actually implausible demands relating to the City of London, including a veto over single market financial rules.
Because asset sales are one-off, that will make it harder for Germany to get below the ceiling on borrowing in 2005 set by the euro area's stability pact.
More recently, politicians have had to accept debt brakes and other devices to limit borrowing and many have submitted to external surveillance by independent monitors such as the U.K.'s Office for Budget Responsibility or, under the euro zone's Fiscal Pact, by the European Commission.
They fear that abandoning the pact would hurt the euro's credibility in the eyes of the markets.
VAT, in order to ensure that Portugal does not flout the deficit ceiling of 3% imposed by the euro-zone's stability pact.
Following the weekend political developments in France and the Netherlands, the German-inspired fiscal pact, agreed by euro-zone leaders in Brussels in December, could also be delayed or thrown into question.
Sanctions exist, in theory, in the stability and growth pact, which requires euro-area countries to keep deficits below 3% of GDP and government debt below 60% of GDP, but they have never been imposed.
The extra cuts are needed to deal with what forecasters say would otherwise be a 2013 budget deficit of 4.5% of GDP, way over the 3% limit enshrined in the euro zone's new fiscal pact.
The rules of the Stability and Growth Pact - which govern the euro - had been reinforced.
America has the Congressional Budget Office (CBO) and the euro zone has the Stability and Growth Pact (see article).
And thanks to the euro area's stability and growth pact, Germany has limited room to stimulate its economy using fiscal policy.
The deficit is currently running at almost twice the level permitted under the stability pact for countries within the euro zone.
Germany is already in breach of the euro area's stability and growth pact, which supposedly limits government deficits to 3% of GDP.
He has made a decent fist of running Portugal over the past two years, including an honest effort to observe the budget-deficit ceilings set by the euro area's stability and growth pact.
It needs to make savings as early as next year if it is to carry out its promised tax cuts of euro3 billion without breaking the deficit limit decreed by the euro zone's stability and growth pact.
EU's stability and growth pact, fiscal policy in the euro area will be slightly contractionary in both 2003 and 2004.
It looks more like a mutual defence pact: an attack on one euro-zone member is now an attack on all.
The pact, he said, enhanced the euro's permanence "contrary to all the negative prophecies".
The stability-and-growth pact approved by the members of the euro zone looks for budget balance by 2004.
ECONOMIST: The German economy: Holding steady, just, maybe—and maybe not | The
The pact may be flawed, but the euro area still has fiscal problems which its members need to address.
Nobody failed to see the irony that it was Germany which, in the late 1990s, had insisted on a rigid stability pact as its price for accepting the euro.
Mr. Draghi pointed to the imminent conclusion of a fiscal pact that will expand the scope for euro-zone countries to keep each other's budget policies on the straight and narrow.
In December 2011, he opted for diplomatic isolation by vetoing the euro zone's plan to embed its fiscal pact in the EU treaties rather than risk confrontation with his party's Europhobes in parliament.
In any event, the current thrust of German government thinking is that it would be wrong to let a wayward decimal or so halt the euro now that the European Union has agreed on a stability pact to police it.
The Euro will bolster the single market and, through its linked stability pact, constrain public spending.
Seen from Brussels, Italy is increasingly the big test of the new (and weaker) stability pact, which is supposed to set fiscal rules for euro members.
Europe, turning inward to absorb the former Warsaw Pact nations, made the fateful blunder of embracing the euro rather than a more aggressive program of reform in labor markets, subsidies and the like.
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