Letter: EU 3per cent 'limit' on budget deficit is a fallacy

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The Independent Online
Sir: Gavyn Davies ( 29 April) is guilty of perpetuating the myth that Maastricht imposes a limit of 3 per cent on budget deficits. Three per cent is merely a reference value, such that the EU makes an evaluation of the situation of states exceeding this value in order to determine whether their deficit can be considered to be excessive.

Such an evaluation must, under the treaty, take into account such factors as "government investment expenditure" (ie public investment is allowed even over 3 per cent) and "the medium-term economic and budgetary position" (ie counter cyclical deficits are also allowed). It requires a qualified majority (more than two-thirds of the votes) for Council to decide that a deficit is excessive.

A combination of Euro-sceptics (who like to portray the Maastricht convergence criteria as impossibly rigid) and fiscal conservatives (who want to reduce public deficits come what may) have led to much of the press referring to the 3 per cent as an absolute limit. It is a shame that your specialist columnist appears also to have been taken in by this fallacy.

Richard Corbett

Antwerp, Belgium