Trichet rejected the notion that fiscal discipline would hamper growth in the Eurozone.

He’s wrong for the macro economy.

“It is a complete fallacy to say that fiscal soundness dampens growth. It is exactly the contrary. It is the absence of fiscal credibility which dampens growth,” he said.

He’s right at the micro level of the national govts given the eu’s current institutional structure.

They need fiscal expansion to come from the ECB level rather than the nat gov level.

But he probably wouldn’t agree with that either.

With current policy, the eurozone institutional structure can only survive with an impossibly large surge in exports.

A cartoon with a fencer stabbing a figure labeled the euro zone and exclaiming ‘Trichet’ as he stabs it?

One Response

  1. Dear Warren,

    Trichet knows very little Economics as he is just a technocrat! However, even at the national EU member level he is wrong as the deficit financing is available when European banks can borrow at 1% and there are a lot of unemployed resources and private investment is not forthcoming!

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