Driving Growth or Driving Debt: Fiscal Stimulus Back on Stage?

Despite unprecedented monetary stimulus packages in all major currency areas for more than half a decade now, the economic performance in many parts of the world is still widely considered as unsatisfactory. This has given fresh impetus to make heavier use of fiscal tools. However, the limits to fiscal policy – in particular high public debt levels in many countries – had been the reason that the monetary authorities were urged to take over in the first place. As the ultra-low interest rate period so far has not been used for ambitious consolidation efforts, there is a controversial debate on whether or not more public spending may be a macroeconomic game-changer for the good. This debate is particularly pronounced in the European Union where the interpretation of the common fiscal framework is an ongoing matter of dispute. This coincides with even more fundamental questions regarding the future shape of the EU in the aftermath of the British referendum that challenges business leaders and policy makers alike.