I and others have watched, with amazement and horror, the emergence of a consensus in policy circles in favor of immediate fiscal austerity. ... This conventional wisdom isn’t based on either evidence or careful analysis.
vs. Alberto Allesina, whose research shows that "large, credible, and decisive" spending cuts to reduce budget deficits have frequently been followed by economic growth.
... austerity can stimulate economic growth by calming bond markets, which lowers interest rates and promotes investment. In addition, he says, deficit-cutting reassures taxpayers that more wrenching fiscal adjustments won't be needed later. That revives their animal spirits and their spending. Alesina says that as a way to shrink deficits, spending cuts are better for growth than raising taxes. The Madrid paper, a summary of his views, was influential enough to be cited in the official communiqué of the EU finance ministers' meeting.The intellectual debate mirrors the political one between Germany and the US:
Germany has Europes largest austerity package, with up to 80 billion Euro worth of spending cuts being imposed under a strict government savings programme agreed by Ms Merkel’s coalition government. Both Spain and the UK have also recently unveiled large government savings programmes, the largest since the end of WWII.
Chancellor Merkel ... constantly reminded anyone interested in listening that according to her ‘savings programmes speed up private consumption because they give people a sense of security’.
Her policies are sure to clash with those of the US after Ms Merkel openly rejected advice from US President Obama that a European idea ‘to save its way out of the debt crisis’ is naive and could aversly affect the fragile global economic growth presently taking place.
No comments:
Post a Comment