By Matthew Barrett
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José María Aznar, who was the Prime Minister of Spain from 1996 until 2004, and a member of the centre-right People's Party, has written for the Times today (£). Aznar, who holds Europhile views, criticises the way European Union member states deviated from the strict fiscal rules they were expected to abide by, leading to the economic woes which now face several member states.
Firstly, Aznar welcomes European leaders waking up from "a denial of reality": "Europe’s political leaders are finally acknowledging the reality of the debt crisis suffered by some eurozone countries. This change of attitude is good news. Until last week’s summit, the European political consensus was a denial of reality, embellished with a large amount of rhetoric and appeals to a false sense of European solidarity."
Aznar says member states did not abide by the strict financial rules that were originally intended for the EU: "The original Stability and Growth Pact stated that each country must keep its annual budget deficit below 3 per cent of GDP and national debt below 60 per cent of GDP. Running roughshod over those strict fiscal and budgetary discipline regulations was the eurozone’s first big mistake.."
Aznar then analyses the problem for each of the PIIGS: "Greece joined the euro without really fulfilling the membership criteria and its uncontrolled public expenditure has deeply damaged its competitiveness. Ireland thrived and become more competitive, but the excessive risks that its banks took burst the bubble and led to fiscal crisis. Portugal has left its stagnant economy, with an overdominant public sector, unreformed. In Italy, lack of strong growth coupled with increasing public debt lies at the core of its problems."
Finally, Aznar says EU members should go back to respecting the original financial rules for states: "The solution is to rediscover and respect the original regulations of the euro and to liberalise Europe’s economies. If instead the eurozone evolves towards a transfer system that perpetuates subsidies, we will be buying stability at the expense of growth."