European Debt Crisis and Fiscal Exit Strategies
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.)
|Date of creation:||Jun 2010|
|Date of revision:|
|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/
More information through EDIRC
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.:
- Catherine Mathieu & Henri Sterdyniak, 2003.
"Réformer le Pacte de stabilité : l’état du débat,"
Sciences Po publications
info:hdl:2441/1783, Sciences Po.
- 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.
- Jürgen von Hagen & Jean Pisani-Ferry & Jakob von Weizsäcker, 2009. "A European Exit Strategy," Policy Briefs 328, Bruegel.
- Catherine Mathieu & Henri Sterdyniak, 2007.
"How to deal with economic divergences in EMU ?,"
- Catherine Mathieu & Henri Sterdyniak, 2007. "How to Deal With Economic Divergences in EMU?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 4(2), pages 281-307.
- Catherine Mathieu & Henri Sterdyniak, 2007. "How to deal with economic divergences in EMU ?," Sciences Po publications 2007-14, Sciences Po.
- 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).
- Servaas Deroose & Sven Langedijk & Werner Roeger, 2004. "Reviewing adjustment dynamics in EMU: from overheating to overcooling," European Economy - Economic Papers 2008 - 2015 198, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
- Jacques Le Cacheux, 2005. "Politiques de croissance en Europe. Un problème d'action collective," Revue économique, Presses de Sciences-Po, vol. 56(3), pages 705-713.
- Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2010. "The future of public debt: prospects and implications," BIS Working Papers 300, Bank for International Settlements.
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 references are entirely missing, you can add them using this form.