Thursday, February 07, 2008

Trichet on Fiscal Stimulus

Jean-Claude Trichet, President of the European Central Bank, joins the Coalition against Fiscal Stimulus:
With respect to fiscal policies, a discretionary fiscal loosening in EU countries should be avoided. There is ample evidence that activist fiscal policies were not effective in stabilising European economies but rather led to sustained increases in the ratios of government expenditure and debt to GDP. Allowing the free operation of automatic stabilisers in countries with strong fiscal positions and safeguarding the long-term sustainability of public finances are the best contributions that fiscal policy can make to macroeconomic stability.
HT: RTE Blog.