Report
Patrick Artus

Could the positive effects of a euro-zone budget and public debt make them acceptable to the Northern euro-zone countries and Germany?

It is well known that many euro-zone countries are opposed to the creation of a euro-zone budget and public debt due to the cross-country transfer payments that would ensue. But if there were a single euro-zone budget and public debt: There would of course be a mechanism to correct divergent cyclical positions and structurally divergent income levels between the euro-zone countries; As the euro zone is comfortably fiscally solvent, there could no longer be any public debt crises and the euro zone would have fiscal leeway; This fiscal leeway could be used to carry out policies to stimulate corporate investment in countries where it is abnormally low, which would eventually increase growth in the euro zone, reduce the divergence between the euro-zone countries’ growth and income trajectories and therefore strengthen the euro zone and put an end to political crises. The Northern euro-zone countries and Germany should weigh up the objective costs and benefits for them of the creati on of a single euro-zone budget and public debt. On the one hand, they would have to finance transfer payments to the other euro-zone countries; but on the other, they would benefit from the elimination of financial crises, from stronger growth in the euro zone and from greater political stability in the zone.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

Other Reports from Natixis

ResearchPool Subscriptions

Get the most out of your insights

Get in touch