The New Philosophers
At a recent meeting of G-20 finance ministers, US Treasury Secretary Jack Lew discussed “philosophical differences with some of our friends in Europe” before urging Europeans to do more to boost growth. His reference to philosophy gets to the heart of why Europe is finding it so difficult to escape from its current malaise.
PRINCETON – At the recent meeting of G-20 finance ministers in Australia, US Treasury Secretary Jack Lew noted “philosophical differences with some of our friends in Europe,” before urging Europeans to do more to boost their anemic growth rate. The terminology is striking, and underscores the difficulty of Europe’s search for a way out of its current malaise.
Canada’s finance minister, Joe Oliver, joined the call for fiscal expansion in Europe – a position for which there seems to be some support within the European Central Bank. Indeed, ECB President Mario Draghi has advocated higher spending by more fiscally strong countries like Germany. And ECB Executive Board member Benoit Coeure, together with his former colleague Jörg Asmussen, currently Germany’s deputy labor minister, recently suggested that Germany should “use its available room for maneuver to promote investments and reduce the tax burden of workers.”
In fact, most of the world believes that Germany should adopt a more expansive fiscal policy. According to this view, austerity is counter-productive, because it induces slowdowns and recessions that make long-term fiscal consolidation more difficult.