Læs hele analysen fra Natexis her
The economic policy strategy pursued by the euro zone until now is open to criticism for two main reasons. Firstly, the choice of reducing fiscal deficits meant that all demand stimulation is provided by the ECB, resulting in a very expansionary monetary policy with the associated drawbacks, and secondly, it seems that the fiscal multiplier, in this configuration, is very high, resulting in a sharp decline in activity related to the fiscal consolidation. But increasing the fiscal deficits of euro-zone countries again is dangerous: the perpetual increase in public debt, especially if it finances current expenses and not investment, will eventually arouse a reaction from financial markets. The right strategy is probably to combine further fiscal consolidation with the issuance of new euro-zone debt financing profitable and efficient investments. This debt would be perceived as a different debt, of high quality, by investors, especially German savers who must be induced to provide capital financing again in the euro zone.
