Friday, September 19, 2014
German and fiscal policy of austerity
German finance minister Schauble is not going to be “led astray” by higher deficits, so Europe will not get help from German fiscal policy. They want to see structure reforms without spending money. This emphasis on structural reforms will determine the future of Europe.
Regardless of the pressure placed on it from all forms of government institutions around the world, Germany has been holding the line on fiscal prudence. Only in the macroeconomic world will most believe that fiscal prudence is running greater budget deficits to increase aggregate demand and offset the "paradox of thrift". The macroeconomic religion says that you have to believe in fiscal multipliers that are above one and will stimulate private spending.