Thursday, September 1, 2016
Why Europe Needs A Fiscal Union
Europe needs its own Alexander Hamilton who was the first Treasury Secretary in the US. It has provided the ECB with the tools to manage inflation. The central bank has a powerful tool which it can use to fight price inflation. Raising interest rates has been successful in moderating the forces of price inflation. Monetary policies, however, have not been effective in fighting deflation. Low interest rates have not been effective in reaching the ECB's 2% inflation target. It would be politically impossible in Europe to establish a fiscal authority that is responsible for dealing with the problems of weak demand. However, it would be possible for several existing entities to work together to design and implement an effective fiscal policy apparatus which is described in this article.