Suchergebnisse

The financial crisis and ensuing economic meltdown has led to sharp increases
in the deficits and debt levels of many advanced economies. The run-up in
public sector indebtedness helped to restore private sector balance sheets,
laying the foundation for economic recovery in these regions. But the
so-called ?sovereign? debt crisis in the Eurozone has undermined the fiscal
resolve that has, thus far, kept truly sovereign governments from slipping
into a bona fide depression. Fearful of becoming the next Greece, governments
that could allow an unlimited fiscal adjustment to restore full employment,
are methodically weakening their fiscal support mechanisms and setting
themselves on a path to becoming the next Japan.

Social unrest across Europe is growing as Euroland's economy collapses faster than the United States', the result of falling exports and a weaker fiscal response. The controversial title of this brief is based on a belief that the nature of the euro itself limits Euroland's fiscal policy space. The nations that have adopted the euro face market-imposed fiscal constraints on borrowing because they are not sovereign countries. Research Associate Stephanie A. Kelton and Senior Scholar L. Randall Wray foresee a real danger that these nations will be unable to prevent an accelerating slide toward depression that will threaten the existence of the European Union.