Dr. Dirk Ehnts:

On how to measure those targets, that is a task I would give to people who are experts in their fields. We have a wide range of targets and should agree on what the targets are. We can pick some realistic targets, hopefully, and try to aim at them. It is difficult because we cannot project how much money we need to hit those targets. It will be interesting to see what eurozone nations will do and what is cost-efficient and resource-efficient in terms of reaching those goals and addressing those problems. Sometimes it is not about the money but about looking for the right mechanism to reach a target. We tend to discuss the money but do not address the resources. If Germany, for example, were to have full employment and we tried to hire workers to hit some kind of target, it would be difficult. However, if another country still had unemployed workers, it would be easy for that country to hire those people.

We should focus more on the energy we have, the raw materials, the resources and the workers, and not so much on terms such as GDP and euro. As I said, I would leave that definition of targets to another economist or specialist in the field.

On the fiscal standards, I think the Senator is correct. Blanchard’s proposal is a compromise; with regard to fiscal standards, the rules are not completely thrown out the window. It is very complicated in the eurozone because some people are afraid of eurozone governments spending too much money, and if the rules are as they are today, there is no limit. Government spending could just be increased, and it would be possible for any country to buy some kind of firm from another country and move the production to a domestic location. The euro is an experiment and it is difficult. It is quite clear that countries should not be able to spend whatever they want but it is also clear the rules have been too tight, given there was an above-average rate of unemployment for the past 20 years. There was an above-average rate before, during and after the global financial crisis, so there is a problem.

The macroeconomic mindset that applies to policymakers suggests they still believe in and think in austerity, so it is more important to be expansionary and to deal with the problem of governments overspending when it arises. There is no problem of governments overspending at a national level. That has not been a problem for the past 20 years and I do not expect it will be a problem for a further ten at least. Why should we use this kind of fiscal framework to address a problem we do not have? Of course, one could argue we do not have this problem because we have these fiscal standards, but other countries such as Canada do not have these fiscal standards and they are doing fine.