The IMF’s analysis suggesting that “fiscal multipliers” are rather bigger than many governments have been assuming does not tell us much that we did not already know about the euro-zone. It’s pretty clear that austerity has severely damaged growth in the peripheral economies. If nothing else, however, the analysis serves as a timely reminder that recent policy innovations like the ESM and the ECB’s latest bond purchase plan cannot address the fundamental problems at the heart of the euro-zone crisis. If anything, those problems are still multiplying.
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