“We have reached our limits,” said Axel Weber, president of Germany’s Bundesbank, in Frankfurt on Tuesday. “The expectation that we could neutralise this synchronised recession through short-term fiscal policy measures is false. We should not even try. There will be costs.”
From this. Apparently they think that the SGP is the key to preserving monetary union, rather than, say, preventing mass unemployment.
For those of us in secure employment, this is shaping up to becoming a fascinating natural experiment in applied political economy.
Update: Christina Romer has a very nice introduction to the lessons of the Great Depression for today’s policy makers here.