Martin Feldstein explains why economic policies in the eurozone are a blueprint for a depression by choice. He is particularly concerned by a statement from a member of the ECB that austerity is not being implemented fast enough.
To make his point, he uses France as an example. He illustrates the mechanisms that were available to France to deal with recession before it moved to the common currency union. It was able to depreciate the franc to increase exports and reduce imports; it was able to lower interest rates to stimulate investment and consumption, and it could lower taxes and increase government spending to expand demand. None of those options are available today to Greece, Italy, Spain and Portugal. Even worse, they are being pressured to raise taxes and cut government spending in order to qualify for financial assistance.
Liberal economists have been making this argument for some time. Martin Feldstein is a conservative economist who worked in the Reagan administration.
No comments:
Post a Comment