[PEN-L:1806] Re: 3% target EMU-IMF

[dhenwood@xxxxxxxxx (Doug Henwood)]

At 3:45 AM 12/8/95, Massimo De Angelis wrote:

>One of the criteria at the basis of current EEC "integration" and of
>the slashing of public expenditure (and of current struggles in France) is
>the 3% deficit-to-GDP ratio. I read in a recent posting by
>D Shniad on IMF pressing Ottawa to slash unemployment benefits,
>pensions, health care etc., that the 3%  target "would leave the . . .
>debt-to-GDP ratio declining only slowly from a very high level".
>I was puzzled by the same figure used by both Europe and Canada.
>1. What are the targets used in other countries?
>2. Does anybody know where the 3% target comes from both in
>Europe and outside Europe? 3. Is it used as a common yeardstick for
>global finances? 4. Is ths a criteria also used for the South?

I don't know where the 3% figure came from, but its sanctification in
Maastricht seems to have spread quickly as an IMF/OECD standard. In its
Economic Outlook, the OECD has often published dot graphs of the membership
- one axis labeled debt (total gross public debt under Maastricht can be no
greater than 60% of GDP), the other marked deficit, dotted lines outlining
the Maastricht "zone of prudence." Sometimes it gets fancy and does 2-year
charts, with two dots per country showing the dual rates and direction of
change. (I pinched one of these for LBO some time ago.) I've not seen the
same public pressure explicitly applied to the South, but I'll bet if you'd
ask them, they'd say they're worthy targets.

Doug

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