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Fiscal space and low interest rates: A Eurozone perspective

Buti, Marco, Carnot, Nicolas, (2016), “Fiscal space and low interest rates: A Eurozone perspective”, VoxEu, 28 November

The European Commission has just called for a fiscal stance that is more supportive of the recovery and of monetary policy in the Eurozone. This column argues that the case is strong for spending now on investment and other targeted programmes supporting growth and employment. However, fiscal space is heterogeneously distributed across the Eurozone, with some countries able to exploit a clear margin, and others needing to pursue a more prudent approach of gradual debt unwinding. A common stabilisation capacity would help for managing shocks that cannot be absorbed by national stabilisers alone.

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