IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

European Debt Crisis and Fiscal Exit Strategies

  • Catherine Mathieu

    (Observatoire Français des Conjonctures Économiques)

  • Henri Sterdyniak

    (Observatoire Français des Conjonctures Économiques)

The 2007-2009 financial crisis was caused by financial markets’ greed and instability. The crisis led public debts and deficits to rise substantially in developed countries. Financial markets and international institutions claim for a “fiscal exit strategy” through rapid reductions in public deficits and substantial falls in public debts owing to large public spending cuts (especially social expenditure). The article shows that the state of public finances was generally satisfactory before the crisis; the rise in deficits was needed for macroeconomic stabilisation purposes and does not signal higher future interest rates or inflation. ‘Crisis exit strategies’ should keep interest rates at low levels and government deficits, as long as they are necessary to support activity; they should question financial globalisation and macroeconomic strategies in neo-mercantilist and in liberal countries. The crisis should not be an opportunity for leading classes and European technocracies to cut social spending. Strengthening the Stability and Growth Pact would be dangerous if it deprived Member States of policy tools that were helpful in the crisis. The euro area should fight against speculation on public debts by ensuring that public debts are collectively guaranteed by the ECB and the Member States. World economic stability is not threatened by public finances imbalances, but by growing speculative financial activity.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ofce.sciences-po.fr/pdf/dtravail/WP2010-11.pdf
Download Restriction: no

Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2010-11.

as
in new window

Length:
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:fce:doctra:1011
Contact details of provider: Postal: 69, quai d'Orsay - 75007 PARIS
Phone: 01 44 18 54 00
Fax: 01 45 56 06 15
Web page: http://www.ofce.sciences-po.fr/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Catherine Mathieu & Henri Sterdyniak, 2003. "Réformer le pacte de stabilité : l'état du débat," Revue de l'OFCE, Presses de Sciences-Po, vol. 84(1), pages 145-179.
  2. Catherine Mathieu & Henri Sterdyniak, 2007. "How to deal with economic divergences in EMU?," Documents de Travail de l'OFCE 2007-14, Observatoire Francais des Conjonctures Economiques (OFCE).
  3. Jürgen von Hagen & Jean Pisani-Ferry & Jakob von Weizsäcker, 2009. "A European Exit Strategy," Policy Briefs 328, Bruegel.
  4. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2010. "The future of public debt: prospects and implications," BIS Working Papers 300, Bank for International Settlements.
  5. Charles Wyplosz, 2006. "European Monetary Union: the dark sides of a major success," Economic Policy, CEPR;CES;MSH, vol. 21(46), pages 207-261, 04.
  6. Servaas Deroose & Sven Langedijk & Werner Roeger, 2004. "Reviewing adjustment dynamics in EMU: from overheating to overcooling," European Economy - Economic Papers 198, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fce:doctra:1011. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francesco Saraceno)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.