Blog de Paul Jorion

En attendant la version en slovaque, voici la version en anglais du billet de Paul Jorion ADRESSE À TOUS LES PARLEMENTAIRES EUROPÉENS QUI ENVISAGENT DE VOTER LA « RÈGLE D’OR », également disponible sur la version en anglais du blog. Merci à  Tim Gupwell.

The inept formulation of the financial stability pact, as well as the “balanced budget rule” which is derived from it, require (as I recalled in a recent column for Le Monde-Économie) a nation’s growth rate to be equal or superior to the level of the “average” coupon demanded by capital markets for its debts. Obviously, the lower the growth, the more a nation’s economy will be in danger, and the more an economy seems to be at risk, the more the capital markets will demand a higher “risk premium” component in the rate of this nation if it seeks to borrow. With the Balanced Budget Rule implying that a nation’s growth must be equal or superior to the average “coupon”, the famous scissors effect comes into play: “if one doesn’t want sovereign debt to increase when the growth rate drops, then this growth rate must increase rapidly so as to exceed the “average” rate of the debt – which is itself increasing due to the risk created by the fall in growth.”

Dear Parliamentarians, if you think that this is the most stupid thing you have ever heard in your whole life, then reconsider your vote, because there is nothing else at stake: it is really for this that you are about to vote!

Of course, it is perfectly possible to emerge from this self-inflicted nightmare by focusing on the comparison of expenses, which can lead to an annual deficit and the fuelling of a nation’s accumulated debt, with revenues instead. But to talk of revenues means talking of “taxes” and talking of “taxes” inevitably reminds us that in general the ruling classes of our nations are always tempted by the possibility of avoiding paying them either entirely or in part, which is why they prefer to talk in terms of “growth”, regardless of the liberties which thereby need to be taken with logic, mathematics and common sense in general.