Europe has been used to Germany providing a strong monetary anchor since the collapse of Bretton Woods, but Europe should also value the strength of the German fiscal anchor. By running a balanced budget at the peak of the economic cycle in 2007 (sustained also into 2008), Germany was well equipped to lay its fiscal credibility on the line when doing so became essential for the future cohesion of monetary union. At a time of crisis for Europe, it is indeed fortunate that the German budget deficit ratio to GDP this year is likely to be a relatively moderate 4% (or thereabouts). Advocates of fiscal activism have been served a sharp reminder by bond market vigilantes that there is no… Read more
Bruegel blog
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In praise of German conservatism
25th June 2010
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In praise of German conservatism
5th June 2010
Europe has been used to Germany providing a strong monetary anchor since the collapse of Bretton Woods, but Europe should also value the strength of the German fiscal anchor. By running a balanced budget at the peak of the economic cycle in 2007 (sustained also into 2008), Germany was well equipped to lay its fiscal credibility on the line when doing so became essential for the future cohesion of monetary union. At a time of crisis for Europe, it is indeed fortunate that the German budget deficit ratio to GDP this year is likely to be a relatively moderate 4% (or thereabouts).Advocates of fiscal activism have been served a sharp reminder by bond market vigilantes that there is no such… Read more
