Many high-profile economists now favor revising the eurozone’s fiscal rules to allow for public investment aimed at accelerating economic recovery, arguing that record-low interest rates would make increased capital spending by governments tantamount to the proverbial "free lunch." So why do German officials refuse to get on board?
ATHENS – Following the publication of the International Monetary Fund’s latest World Economic Outlook, high-profile economists like Olivier Blanchard, Larry Summers, Mario Monti, and Reza Moghadam have come out in favor of revising the eurozone’s fiscal rules to allow for public investment aimed at accelerating its economic recovery. They argue that, given record-low borrowing costs of about 1%, increased capital spending by governments would effectively amount to the proverbial “free lunch,” yielding sufficiently high tax revenues that the debt/GDP ratio would not rise. So why do German officials refuse to get on board?
ATHENS – Following the publication of the International Monetary Fund’s latest World Economic Outlook, high-profile economists like Olivier Blanchard, Larry Summers, Mario Monti, and Reza Moghadam have come out in favor of revising the eurozone’s fiscal rules to allow for public investment aimed at accelerating its economic recovery. They argue that, given record-low borrowing costs of about 1%, increased capital spending by governments would effectively amount to the proverbial “free lunch,” yielding sufficiently high tax revenues that the debt/GDP ratio would not rise. So why do German officials refuse to get on board?