What problems are posed by euro-zone countries’ current fiscal policy?
Current fiscal policy in the euro-zone countries primarily poses the following questions: Could the end of quantitative easing cause fiscal solvency problems and a situation of excessive public debt to resurface ? Is the ECB condemned to keeping interest rates forever very low (to “ fiscal dominance †)? Is the return to the structural fiscal deficit target of 0.5 percent of GDP going to require a dangerously restrictive fiscal policy? If real activity falls sharply in the euro zone, and given that there is very little fiscal space, would it be possible to use fiscal policy intens iv ely?