Schools brief | Fiscal multipliers

Where does the buck stop?

Fiscal stimulus, an idea championed by John Maynard Keynes, has gone in and out of fashion

Aug 13th 2016

AT THE height of the euro crisis, with government-bond yields soaring in several southern European countries and defaults looming, the European Central Bank and the healthier members of the currency club fended off disaster by offering bail-outs. But these came with conditions, most notably strict fiscal discipline, intended to put government finances back on a sustainable footing. Some economists argued that painful budget cuts were an unfortunate necessity. Others said that the cuts might well prove counterproductive, by lowering growth and therefore government revenues, leaving the affected countries even poorer and more indebted.

This article appeared in the Schools brief section of the print edition under the headline “Where does the buck stop?”