A Decentralised Fiscal Stimulus Is The Right Answer To The EMU’s Problems”, Social Europe, 9 November
The global financial crisis exposed the euro’s original sin of depriving member states of their fiscal autonomy without transferring this spending power to a higher authority. This left member states utterly defenceless in the face of economic crises such as the 2008 booms-gone-bust. Yet, the crisis didn’t bring about, as one might have expected, a loosening of the budgetary constraints imposed on individual governments (thus allowing them to pursue counter-cyclical stimulus policies) or by moving towards a fully-fledged fiscal union (or at least a modicum of economic coordination between surplus and deficit countries). Instead, we got the worst of both worlds: further restrictions on national fiscal autonomy and no increase in federal fiscal capacity. The result, as predicted by many non-mainstream economists, has been a deeper and more prolonged crisis than that of the 1930s (resulting in all-out humanitarian crises in a number of countries).
Relevant Posts
- Furman, Jason, (2016), “The New View of fiscal policy and its application”, VoxEu, 2 November
- Veld, Jan in ‘t, (2016), “Public investment stimulus in surplus countries and their Eurozone spillovers”, VoxeEU, 9 September