Is the European Union imploding?

The prospect of being accepted into the EU provided the nations of Eastern and Central Europe with a strong incentive to achieve fiscal balance - a process somewhat similar to what happened in Western Europe at the time the euro was launched. In both cases, however, after initial progress, countries have shown clear signs of political "fatigue": in the euro area, the Stability Pact has imploded; throughout Eastern Europe, budget deficits have started to rise.

In the Czech Republic last year, the budget deficit jumped to 13% of GDP, a threefold increase since 1999. Although this included a one-time charge for bank restructuring costs, this year the deficit will close above 6% of GDP. In Poland, the deficit is also moving close to 6% of GDP, up from 2.9% in 2001. In Hungary the budget deficit is widening again, after narrowing to 4% of GDP in 2001. Malta, too, has a deficit close to 10% of GDP, up four percentage points since 2001. Only the Baltic countries seem able to maintain sound fiscal policies.

In many ways, this is not surprising: once politicians no longer face annual EU progress reports - and the threat of exclusion - fiscal relaxation becomes much less costly. At the same time, the big euro area members (France and Germany) do not have a leg to stand on to criticize other countries' fiscal policies, so there are virtually no international constraints on EU countries' budget deficits. Indeed, these constraints have proven to be utterly useless after a country's EU entry, and it will be hard to impose them as an admission criterion for other potential entrants.

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.


Log in;
  1. Patrick Kovarik/Getty Images

    The Summit of Climate Hopes

    Presidents, prime ministers, and policymakers gather in Paris today for the One Planet Summit. But with no senior US representative attending, is the 2015 Paris climate agreement still viable?

  2. Trump greets his supporters The Washington Post/Getty Images

    Populist Plutocracy and the Future of America

    • In the first year of his presidency, Donald Trump has consistently sold out the blue-collar, socially conservative whites who brought him to power, while pursuing policies to enrich his fellow plutocrats. 

    • Sooner or later, Trump's core supporters will wake up to this fact, so it is worth asking how far he might go to keep them on his side.
  3. Agents are bidding on at the auction of Leonardo da Vinci's 'Salvator Mundi' Eduardo Munoz Alvarez/Getty Images

    The Man Who Didn’t Save the World

    A Saudi prince has been revealed to be the buyer of Leonardo da Vinci's "Salvator Mundi," for which he spent $450.3 million. Had he given the money to the poor, as the subject of the painting instructed another rich man, he could have restored eyesight to nine million people, or enabled 13 million families to grow 50% more food.

  4.  An inside view of the 'AknRobotics' Anadolu Agency/Getty Images

    Two Myths About Automation

    While many people believe that technological progress and job destruction are accelerating dramatically, there is no evidence of either trend. In reality, total factor productivity, the best summary measure of the pace of technical change, has been stagnating since 2005 in the US and across the advanced-country world.

  5. A student shows a combo pictures of three dictators, Austrian born Hitler, Castro and Stalin with Viktor Orban Attila Kisbenedek/Getty Images

    The Hungarian Government’s Failed Campaign of Lies

    The Hungarian government has released the results of its "national consultation" on what it calls the "Soros Plan" to flood the country with Muslim migrants and refugees. But no such plan exists, only a taxpayer-funded propaganda campaign to help a corrupt administration deflect attention from its failure to fulfill Hungarians’ aspirations.

  6. Project Syndicate

    DEBATE: Should the Eurozone Impose Fiscal Union?

    French President Emmanuel Macron wants European leaders to appoint a eurozone finance minister as a way to ensure the single currency's long-term viability. But would it work, and, more fundamentally, is it necessary?

  7. The Year Ahead 2018

    The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

    Order now