This is a preview of a new monthly newsletter from Steven A. Tananbaum Senior Fellow for International Economics Robert Kahn. In it, he analyzes major developments and trends affecting macroeconomic policy and financial markets. You are not subscribed to the newsletter. We invite you to do so at this link.
Robert Kahn, Steven A. Tananbaum Senior Fellow for International Economics
Advocates of austerity appear to be in retreat. The idea that economic growth drops precipitously after a government's debt reaches 90 percent—a much-cited reason for fiscal consolidation—has been discredited. Steep cuts in government spending aimed at reducing national debt are damaging growth prospects in both the United States and Europe, leading policymakers and academics alike to call for austerity measures to ease up until recoveries are more firmly entrenched. In the peripheral countries of Europe in particular, a vicious cycle of fiscal tightening resulting in lower economic growth, missed fiscal targets, and financing shortfalls—which in turn require more cuts—is becoming a major concern. Advocates of more government spending note that borrowing rates for the major industrial countries remain at extraordinarily low levels, hardly signaling an imminent crisis. Thus, the case for easing austerity seems compelling. Read the Full Monthly Report
We are seeing the outlines of a European banking union in recent discussions of common rules for resolving a failed bank. However, consensus has yet to be reached over the allocation of losses. Read more »
Regarding economic issues at the G8, leaders appear to have some consensus on common principles and first steps. If the absence of failure is a success, then the summit looks to have succeeded.Read more »
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