Archive for the ‘Fiscal Policy’ Category

Fiscal Consolidation: politics is the key

Monday, March 29th, 2010

How best to implement fiscal consolidation? The technical aspects of the question are absorbing. But they are of secondary importance, because fiscal consolidation is first and foremost a matter of politics. Governments do not initiate – let alone successfully implement – serious fiscal consolidation unless they believe it to be a political winner. And the only way this happens is if the electorate becomes convinced that there is a fiscal crisis which threatens the society as a whole.   (more…)

The EU Paper Tiger

Friday, March 26th, 2010

“We hope that it will reassure all the holders of Greek bonds that the eurozone will never let Greece fail” was EU President Van Rompuy’s “spin” on yesterday’s EU decision on support for Greece. But what actually did the EU decide? Well, it decided firstly that the IMF would take the running on Greece — which was always inevitable. And on the EU’s involvement in an IMF programme? Well, it decided that, if things got really serious, it might possibly think about contributing to the IMF programme. But the European Commission and the European Central Bank would have to give this the OK. And — wait for this — any EU country will be able to veto support!