Wolff, B. G. (2014) “Europe’s fiscal wormhole – with all of the rules pointing toward recession, how can Europe boost recovery?“, Project Syndicate, 24 Οκτωβρίου.
Τhe International Monetary Fund now estimates a 30% risk of deflation in the eurozone, and growth figures within the monetary union continue to disappoint. But policymakers seem trapped in a cat’s cradle of economic, political, and legal constraints that is preventing effective action. The fulfillment of policy rules appears to be impossible without growth, but growth appears to be impossible without breaking the rules.
German Finance Minister Wolfgang Schäuble is politically committed to outdoing his country’s tough domestic fiscal framework to secure what he calls a “black zero” budget. The French government is working to regain credibility on reform promises made in exchange for delays on fiscal adjustment, and Italy, with one of the highest debt burdens in the eurozone, has little room to use fiscal policy. Meanwhile, the European Central Bank is constrained by doubts about the legality of its “outright monetary transactions” (OMT) scheme – sovereign-bond purchases that could result in a redistributive fiscal policy.
With all of the rules pointing toward recession, how can Europe boost recovery?
A two-year €400 billion ($510 billion) public-investment program, financed with European Investment Bank bonds, would be the best way to overcome Europe’s current impasse. Borrowing by the EIB has no implications in terms of European fiscal rules. It is recorded neither as new debt nor as a deficit for any of the member states, which means that new government spending could be funded without affecting national fiscal performance.
Thus, some of the investment spending currently planned at the national level could be financed via European borrowing to relieve national budgets. Such an indirect way of dealing with strict rules would also be easier than starting long and wearying negotiations on changes to the fiscal framework.
Σχετικές αναρτήσεις:
- Eckefeldt, P., Schwierz, C., Giamboni, L., Aarnout, M. & Carone, G. (2014) “Identifying fiscal sustainability challenges in the areas of pension, health care and long-term care policies“, European Economy – Occasional Papers, No. 201, European Commission: Economic and Financial Affairs, Οκτώβριος.
- Galí, J. (2014) “The Effects of a Money-Financed Fiscal Stimulus“, Centre for Economic Policy Research, 24 Σεπτεμβρίου.
- Bertarelli, S., Censolo, R. & Colombo, C. (2014) “Fiscal Convergence in the European Union before the Crisis“, Contemporary Economic Policy, Volume 32, Issue 4, σσ. 784–801, Οκτώβριος 2014.