Daily Archives: February 24, 2012

The political and economic debate on fiscal policy has become increasingly polarised in many countries, and as a result seems to have reached a dead end. Some economists are so concerned about the present rapid rise in government debt that they favour immediate fiscal tightening. Others are so concerned about the risk of renewed recession, and are so unconcerned about the risks from extra public debt, that they demand immediate fiscal easing on a large scale.

In many economies, this debate has now reached a stand-off, in which governments are trying to reduce deficits and debt only very gradually, while hoping that a recovery in private expenditure will keep the economy out of recession. The result, which satisfies nobody, is very slow GDP growth and a continuing rise in public debt ratios. Read more