Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
Krugman blog: The economic consequences of Herr Steinbrueck (December 11, 2008)
There's an extraordinary -- and extraordinarily depressing -- interview in Newsweek with Peer Steinbrueck, the Germany finance minister. The world economy is in a terrifying nosedive, visible everywhere. Yet Mr. Steinbrueck is standing firm against any extraordinary fiscal measures, and denounces Gordon Brown for his "crass Keynesianism."

...

The reason is that the European economy is so integrated: European countries on average spend around a quarter of their GDP on imports from each other. Since imports tend to rise or fall faster than GDP during a business cycle, this probably means that something like 40 percent of any change in final demand "leaks" across borders within Europe. As a result, the multiplier on fiscal policy within any given European country is much less than the multiplier on a coordinated fiscal expansion. And that in turn means that the tradeoff between deficits and supporting the economy in a time of trouble is much less favorable for any one European country than for Europe as a whole.

...

In short, there's a huge multiplier effect at work; unfortunately, what it's doing is multiplying the impact of the current German government's boneheadedness.



I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Fri Sep 28th, 2012 at 05:10:58 AM EST
[ Parent ]

Others have rated this comment as follows:

Display:

Top Diaries

Impeachment gets real

by ARGeezer - Jan 17
18 comments

A Final Warning

by Oui - Jan 10
111 comments

Environment Anarchists

by Oui - Jan 13
4 comments

More Spanish repression

by IdiotSavant - Jan 6
8 comments

Occasional Series