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Slovakia Introduces Debt Ceiling Law Into Constitution

The parliament of Slovakia approved a new constitutional that limits the debt to 60% of GDP. The law includes automatic sanctions that are triggered when the debt level passes the 50% threshold.

Slovakia is one of the poorest nations in the euro-zone. It was the last country though to approve the new EFSF powers. It approved them only in October, while these rules were agreed upon in the July 21 summit.

The move from the small country in the middle of Europe is along the lines of the Merkel-Sarkozy agreement to have stricter budget rules in the euro-zone, a proposal that will be brought to the EU Summit.

Slovakia joins a much larger country in this path. Spain approved a debt ceiling as a change to its constitution a few months ago. This was done through a joint effort of both the ruling socialist party and the center-right PP, which overthrew the socialists in the recent general elections.

It’s important to remember that also the original Maastricht treaty includes a pledge for a 60% debt to GDP ratio and a deficit limit of 3%. Both Germany and France broke these rules.

So, while rules and especially constitutional rules, are very nice, the enforcement and implementation of these rules are far more important.

For more on the euro, see the EUR/USD forecast.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.