Predicting the future requires more luck than skill - this applies
as much to economists as it does to tabloid astrologers. But when
the strength and reputation of an entire political union rest on
the consequences of getting it wrong, there is cause for concern.
During the past year there has been a frenzied look at budget
deficits across the eurozone, and an assessment of countries in
danger of breaching the 3%-of-GDP limit stipulated by the Stability
and Growth Pact. In an eager attempt to disguise the true size of
budget deficits, governments have been wildly overestimating GDP
growth.
Germany is a good example. Its budget deficit is expected to
breach the pact's target - estimates by Barclays Capital range
between 3% and 4% of GDP - and public spending is high and set to
rise further in the wake of recent flood damage. To compensate, the
German government has decided to postpone...
