EU needs radical rethink to enable large fiscal stimulus – ANZ
|Analysts at the Australia and New Zealand Banking Group (ANZ) are of the opinion that the European Union (EU) requires a drastic thought process to take benefits of the fiscal stimulus.
Key quotes
“As the European Central Bank (ECB) stretches the limits of monetary easing, attention is turning to fiscal policy. The euro area (EA) has potential fiscal space of 2.0% of GDP.”
“Potential fiscal space is calculated using a narrow criteria, based purely on the EA budget deficit. It is unlikely to materialise as rules based fiscal policy limits the growth of the public spending path.”
“Hope of a large-scale fiscal boot for the EA will probably be disappointed. We estimate that an expansion closer to 0.25-0.5% of GDP in 2020 is more likely.”
“An overhaul of the current rules and a more medium-term focus on policy settings is required.”
“That will leave an over-onus on the ECB to support reflation. The monetary policy framework needs reviewing, especially in light of the considerable divisions that emerged over the latest easing.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.