The Guardian view on the EU economy: adopt, not outlaw, Keynesian policies | Editorial

Posted by on September 25, 2020 1:30 pm
Categories: Global Stories

During the pandemic, the EU dropped its austerity-inducing budget rules and restrictions on its central bank’s ability to finance government spending. It get should rid of them permanently

In an emergency, the normal rules do not apply. Coronavirus has shown the EU can do things differently. Early on the commission dumped its obsession with balancing the books. The prohibition on monetary financing of government debt by the European Central Bank (ECB) was dropped. This allowed member states the freedom to mitigate the damage of a Covid recession without worrying too much about borrowing levels.

That fear was well-founded. The EU had used high debt levels as a reason to intervene in public policy. Emma Clancy, an economist for the leftwing block of MEPs, has noted the commission had used debt burdens to ask member states to cut spending on, or privatise, healthcare services 63 times between 2011 and 2018. In the EU there is often an Olympian disdain for critics of its fiscal and monetary rules. This is understandable. No one likes to be reminded of one’s own mistakes.

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