While EU Member States stagger and fall under the weight of fiscal fasting at any cost, are the leading European and American socioeconomically long ago came to the consensus that the implementation of fiscal consolidation in times of economic depression similar to the suicide. The cost of lowering public debt is much more simple and cheaper, if Member States fiscal consolidation is carried out when the crisis is over. It is therefore the only ‘life’ alternative to the EU, to put the fiscal consolidation after the crisis.
Even the most Orthodox macro-economists, even those who do not believe in fiscal multipliers, agree that today’s fiscal post (fiscal austerity) in Europe went too far. Eden of the theoretical founding fathers, economist Paul de Grauwe euro (London School of Economics), already three years constantly reiterates that strict fiscal boost will post the country hard to eliminate the fiscal deficits and public debt to a sustainable level of the psyche.
Last year and this year were organized two prestigious Conference the most visible global macroeconomist on the subject of fiscal consolidation. The first one is under the heading of Austerity: Too Much of a Good Thing? organized by Giancarlo Corsetti (University of Cambridge) in the context of the discussions are available, VoxEU also in book form. The other two under the heading Fiscal Policy after the Financial Crisis organised by Alberto Alesina (Harvard) and Francesco Giavazzi (Bocconi) under the auspices of the u.s. National Bureau of Economic Research (NBER). A collection of papers by leading economists in this area will be released in book form the following year, all discussions can be found on the website today, NBER.
Last but not least is this year also organized a special number publication, vestnik, Banking, where they are the leading Slovenian macroeconomists to discuss the relevance of strict fasting (also my contribution to the debate was published).
No one is against the fiscal consolidation. This is necessary, but the important is the timing, so when it is set. John Van Reenen said (London School of Economics): ‘timing is everything’, with thoughts on the painful fiscal consolidation, economic costs cannot be avoided, but they can be significantly reduced. He says that even today have to consider the standard recipe of economic policy and deficit reduction to transfer at the time of the crisis, thus it is possible to significantly reduce the loss of GDP.
In order to show how much the United Kingdom losing to fiscal fasting, Van Reenen with customized macro-economic model, NiGEM estimated the difference in the growth of GDP, taking into account two scenarios: first, with regard to the fiscal consolidation during the depression, and, secondly, with regard to the fiscal consolidation after the end of the crisis. As show results in the table, the United Kingdom by 2015 as a result of the fiscal year, while losing the post was reformed 0.8% and 3.4% of GDP, with the annual loss (the difference between the depresijskim and the actual reach of GDP) greatly increases. Overall, however, United Kingdom in 10 years because of strict fasting which lost a sixth of GDP (16.6%)