The eurozone's fiscal compact prods states to run a budget deficit of no more than 3% of their GDP. This means that even with deflation, most countries are still trying to cut their deficits, compounding the problem. Germany, which has now balanced its budget, could stimulate and still be within the rules, but the government doesn't seem to be interested.
So the eurozone has effectively outlawed Keynesian responses. Even monetarist responses, which rely on the central bank, are much slower and seemingly less effective in Europe. The European Central Bank has been behind the curve in pretty much every decision it's made in the last seven years.
Business Insider
Deflation is here
Europe's Worst-Case Economic Scenario Has Arrived And There May Be No Way Out
Mike Bird
No comments:
Post a Comment