Report
France and Italy: The worst-case scenario would be if the fiscal deficit-financed stimulation of demand turned out to be a failure
France and Italy have decided to stimulate demand by increasing the fiscal deficit in 2019 (increase in transfer payments to households, tax cut s for households). The worst would be if this stimulation did not work, since the long-term drawbacks of an expansionary fiscal policy would then have no quid pro quo . This could happen if, as a reaction to the fiscal deficits: The household savings rate rose; Imports increased sharply; Interest rates rose. Currently, we can see: A rise in the household savings rate in France, but not in Italy; Rapid growth in imports in France, but not in Italy; A rise in long-term interest rates in Italy, but not in France. Both countries are therefore faced with risk that the fiscal deficit - financed stimulus may be ineffective .
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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.
Patrick Artus
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