On Tuesday, the European Commission will abandon its attempt to hold France and Germany to account for running "excessive deficits". Both countries have been running budget deficits of more than 3 per cent of gross domestic product, the ceiling set by the Maastricht treaty, during 2002-04. They are likely to run excessive deficits again next year and, in the absence of determined fiscal reforms, probably for the rest of the decade.

It is well known that Europe's stability and growth pact, designed to enforce the deficit rules, is in serious trouble. The problem is not merely that the pact has lost its bite. There is an increasing amount of research evidence showing that the stability pact has also made no real difference to fiscal policy in the eurozone at all. In other words: it did not even work when it was supposed to be intact.