Dr. Dirk Ehnts:

I thank the Acting Chairman for that question. The 3% rule for public deficit-to-GDP rule was invented by a low-ranking employee at the French Treasury in 1981. His name is Guy Abeille. He had the task of finding a deficit-to-GDP rule. He saw that the French Government at the time had a deficit-to-GDP ratio of roughly 2.6%. He thought that 1% would not be enough, 2% would also not be enough yet, but maybe 3% would be a good ratio, because it would give the French Government some fiscal space. That is how they picked the rule. There is no scientific evidence that would back up this claim that this figure is some kind of equilibrium rule or socially optimal rule. There was no scientific discussion in the 1980s about what kind of specific numbers to choose.

There is also the public debt-to-GDP ratio, which is 60%. It is the same in this case. There was no decision or debate. The figure was more or less picked because it was a number that was roughly the average of the eurozone’s public debt-to-GDP ratios. That is how they came up with these rules. The odd thing is that one would normally expect that if a deficit is always to be 3% or less, public debts should rise. It is not clear how it is possible to fit this 3% deficit rule together with the 60% public debt rule. If a country runs constant deficits, of course its public debt will rise. The two numbers are therefore inconsistent. There has been no evidence that countries with fiscal frameworks like this would somehow grow faster, have less unemployment, or hit any other mission targets better than countries that do not have these kinds of rules. That came out of, I would say, the ideology of the 1980s and 1990s, that the markets would somehow fix things and that the governments should not play too strong a role in the economy.