Whose job is it to stimulate Europe?

January 28, 2009

So do countries which can borrow money more cheaply, Germany for example, have a higher obligation to borrow, spend and make things better for everyone across Europe?

Polish finmin Jacek Rostowski, speaking in a session on the outlook for Europe, seemed to think so:

“Fiscal policy … some countries which are far more able to afford increases in govt expediture and budget deficits than others. We should apply the principle that those with the lowest debt financing costs should consider the most expansive policies.”

He pointed out that Greece is now paying more for financing that Poland, and said further that Poland would not go down the stimulative route, seeing as how credit was still flowing, but instead “leaving space for interest rate reductions.”

He did make clear that this was the province of the central bank.

Rostowski did raise another point I think has legs: financial protectionism. Smaller countries without a big banking sector could see themselves really hurt if governments make lending at home rather than abroad a quid pro quo for bailout money. It is a slippery slope.

James Saft is a Reuters columnist. The opinions expressed are his own.

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/