How can opposing positions on fiscal policy be reconciled?
We will take the example of France, but the debate applies to all countries. Two ideas are simultaneously defended: The first is that it will soon be necessary to discontinue the unlimited fiscal deficit policies and return to more traditional public finance management; The second is, on the contrary, that the recovery plan is insufficient and that the extremely low interest rates should be used to finance far more useful public spending through borrowing. How can these two views be reconciled? The cyclical fiscal deficit can be as high as what is necessary: as long as there is underemployment in the euro zone, the ECB will maintain its policy of monetising fiscal deficits . We must therefore look at whether the fiscal response to underemployment and to the recession has been sufficient. In France, it seems insufficient on the corporate side; The structural fiscal deficit will persist when the ECB stops buying public debt; the constraint that will appear is that the return on the government spending carried out that leads to the structural deficit must be higher than long-term interest rates once the ECB has ended its purchases.