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.