Giavazzi, F. & Tabellini, G. (2014) “How to jumpstart the Eurozone economy“, VoxEU Organisation, 21 August.
The stagnating Eurozone economy requires policy action. This column argues that EZ leaders should agree a coordinated 5% tax cut, extension of budget deficit targets by 3 or 4 years, and issuance of long-term public debt to be purchased by the ECB without sterilisation.
The mantra is that once again it is up to the ECB to save the Eurozone. Quantitative easing is the last policy tool available to jumpstart the Eurozone economy. The longer the ECB waits before starting to buy government bonds, the further away will the recovery be. This analysis, however, overestimates the power of monetary policy.
Relevant posts:
- Mabbett, D. & Schelkle, W. (2014) “The lack of monetary sovereignty is not the reason Eurozone countries struggled during the crisis“, LSE EUROPP, 04 April.
- Granville, Br. (2014) “Poking the Eurozone Bear”, Project Syndicate, 21 February.
- Papadimitriou, D., Nikiforos, M. & Zezza, G. (2014) “Prospects and Policies for the Greek Economy”, Levy Economics Institute Strategic Analysis, February 2014.