The growing severity of the economic downturn is forcing the European Union to break its taboos about letting deficits swell and loosening up state-aid rules. On October 16, the head of the Eurogroup of eurozone finance ministers Jean-Claude Juncker, considered a hard-liner on fiscal discipline, ruled out a "generalised" recovery plan because of the risks to budget rigour.
However, a month and a half later, the EU was scrambling last week to co-ordinate a wide-ranging economic stimulus package in the face of a severe slump.
The European Commission, usually the guardian of budget discipline in Europe, actively encouraged member states to ramp up spending and give consumers targeted tax breaks as part of a 200-billion-euro EU package. "That would have been unthinkable only a little time ago," said economist Jean Pisani-Ferry, director of Brussels-based economic think tank Bruegel.
"The commission, long sceptical about budget policy, acknowledges that it has a role to play," he said.
Officially, the commission says that it will still police member states to make sure their deficits do not spiral beyond an EU limit of three percent of output, enshrined in the bloc's Stability and Growth Pact. However, it has also stressed that it will give as much flexibility as possible in its interpretation of the rule, which allows for some leeway in tough economic times.
"The European Commission is the enforcer of the rules of the Stability and Growth Pact and has taken a relatively tough line on the public finances in the past," said economist Jennifer McKeown at consultants Capital Economics.
"The fact that it is now encouraging extra expenditure is certainly a turnaround, highlighting just how bad the economic outlook has become," she added. "The taboo has been broken. The guardians of dogma are having to face up to reality," said Francis Wurtz, president of European United Left, which groups Communists and reformed Communists in the European Parliament."