Balanced fudge-it

16 August 2011 By Martin Hutchinson

Sarkozy and Merkel like them, and they feature in America, too. But politicians often fudge the numbers, or just change the rules. Nonetheless, in reasonably honest systems such laws slow the build-up of deficits. Perhaps as importantly, they also stigmatize bad behavior.

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French President Nicolas Sarkozy said on Aug. 16 that he and German Chancellor Angela Merkel were proposing that all 17 euro zone countries commit to balanced finances and write that goal into their constitutional law by summer 2012.
The leaders of France and Germany, under pressure to calm the euro zone debt crisis, also will float proposals in September for a tax on financial transactions and push for stronger joint economic governance, Sarkozy said following talks in Paris.
On Aug. 5, Italy’s Prime Minister Silvio Berlusconi promised to introduce a balanced budget amendment.
A balanced budget amendment to the U.S. constitution at one stage featured in negotiations over raising the statutory cap on federal borrowing - an impasse resolved, at least temporarily, on Aug. 2.
Germany in 2009 passed a debt brake provision, binding on both the federal government and the Länder, by which from 2016 the federal deficit will be limited to 0.35 percent of GDP and from 2020 the states will be prohibited from running budget deficits.

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