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The Growth and Stability pact makes no sense. When you introduce a common currency in an area which hardly can be described as an optimal currency area, it's economics 101 that the interest rate weapon will become blunter, and that fiscal policy will have to play a greater role. Both to stimulate the economy during downturns and to cool it at the top of the business cycle. This requires much weaker restrictions on deficit spending, but it also requires a much lower level of sovereign indebtedness over the business cycle, so as to not make the burden of debt overbearing and make stimulus impossible for that reason. The EZ required a 60 % government indebtedness to join. Clearly as events has shown, this level was much too high.

Also, I said the private sector should have supplied the equity, not direct-state investment in productive assets, even if such do make sense in certain industries. Power and infrastructure comes to mind.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Dec 14th, 2011 at 09:40:31 AM EST
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