OECD countries: Fiscal policy can no longer be analysed in isolation from the private savings and investment equilibrium

Fiscal deficits and rising public debt usually cause concern , and i t is hoped that governments stabilise their public debt ratio and contain their deficits. This has led for example to the European Union’s fiscal rules. But we are now in a structural situation of excess private savings. If a chronic fiscal deficit absorbs these excess private savings over investment, is this fiscal deficit cause for concern? Since there are excess private savings, the fiscal deficit does not drive up interest rates; It prevents the accumulation of external assets without the accumulation of external debt, i.e. it prevents the country’s savings from financing capital accumulation abroad; Fiscal deficits can be organised to stimulate investment: increase in public investment, tax incentives for private investment. It is therefore impossible to form an opinion about fiscal policy without also looking at the equilibrium between private savings and investment.