Chip Taylor

Creative accounting

Apparently, joining the EU causes countries to act like states:

Consider government budgets. Normal countries run deficits to the extent they wish. There may be external limits from financial markets, but if there are willing lenders a country can spend whatever its government wants.

Supposedly, that is not true for states. Most are required by their constitutions to have balanced budgets. In practice, that often means that they use assorted tricks to cover up deficits.

So it is now in Europe, where countries in the euro zone have promised to keep their budget deficits under 3 percent of gross domestic product.

...

In France, ... the tactics being used would be quite familiar in many a state capital. The government owns the major electric and gas utilities, which face huge pension bills. You might think that would harm the budget, but France has a better idea.

The two utilities will transfer part of their pension obligations to the government, thus making them more attractive to investors. They will pay the government at least 7 billion euros to take on the obligations - and that money will count as revenue for measuring the budget deficit. It is a neat trick to balance a national budget by taking on additional obligations.

The article compares the EU transition to our transition from the Articles of Confederation to the Constitution.