Think Locally And Grow Globally

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But in one key respect, the new focus on the euro underscores an increasingly troubling economic reality: the tensions caused by growing economic divergence among the 12 countries that use the euro. This is a sharp reversal from the 1990s, when candidates for the single currency moved aggressively to bring their economies in line by slashing budget deficits and keeping a tight lid on spending to bring down inflation. Now Europe has entered a period of "deconvergence" in the jargon of some economists, as bad habits creep back in. In a scolding report on public finances last week, the European Commission noted that, while Belgium, Finland and Ireland had balanced budgets, four members Germany, Greece, France and Italy had allowed their budget deficits to grow beyond the 3% limit laid down in the rules of the single currency, and that the overall debt level of the euro countries is creeping up again from 70.8% of gross domestic product in 2003 to 71.3% in 2004 and a projected 71.7% this year. The debt level isn't supposed to exceed 60% of GDP.