A New Fiscal Policy?

Abstract

We have argued that fiscal consolidation is the necessary first step towards what is really required for sound economic systems; namely, a general reduction in the size of taxes and expenditures. This, again, is easier to do at the global rather than the national level. Fiscal reduction, as part of coherent governance, should be accompanied by (1) limiting fractional banking, (2) liberalizing the financial markets with special attention to freely determined interest rates, and (3) removing the hurdles and obstacles to mobility of resources in the Eurozone. This fiscal reduction can, of course, be designed as a gradual process whose details, however, have to be delineated so that the private sector can adjust as best as possible to predictable changes.