Eurozone finance ministers will meet in Helsinki today to discuss the impact that recent monetary reforms have had on fiscal
Eurozone finance ministers will meet in Helsinki today to discuss the impact that recent monetary reforms have had on fiscal policy—specifically the implementation of the Stability and Growth Pact, a budget regulation enacted in 2010.
The Stability and Growth Pact prevents EU countries from spending beyond their means via a set of fiscal rules, like limiting budget deficits to 3% of a nation’s GDP.
Two events this week led to today’s impromptu meeting. First, the European Central Bank (ECB) lowered deposit facility rates to an all-time low of -0.5%. Second, ECB President Mario Draghi publicly urged governments to increase public spending and cut taxes. Additionally, starting in November, the ECB will buy $20 billion of bonds per month from commercial banks. All these policies could increase budget deficits by raising government expenditures.
Many pundits are criticising the appointment of Paolo Gentiloni to head the economic portfolio of the EU, as he has advocated for a loose fiscal policies that encourage public spending. With many EU countries, including Germany, close to recession, the EU must reevaluate recession prevention methods to prevent a repeat of the 2010 economic meltdown.
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