The optimal design of fiscal consolidation programmes

The ECB recently held a high-level seminar on this topic, with contributions from the various institutions involved in the Troika and some academics.  The presentation files are here.

8 replies on “The optimal design of fiscal consolidation programmes”

The first sentence is right-wing dogma uncorrupted by any fair scientific analysis of economics.

Why bother reading further?


That first line of the programme is a real doozy of an attempt at framing alright.

The risk to fiscal sustainability entailed in the sovereign debt crisis has made fiscal consolidation inevitable in most euro area countries.

The conference will no doubt mainly serve as a spirited rebuttal of Kenynesian analyses of the European component of the global financial crisis, a defence of austerity (fiscal consolidations birth name) with a few nods towards maybe strangling demand more slowly so as not to frighten the peasants.

No mention of the role that bank bailouts have played, no mention of market failure, no mention of this being a private debt crisis that has infected sovereigns. Whacky. Blanchard looks like the only gentle nod towards the reality based community but he is more than balanced by arch-neoliberal Buti and the now prodigiously discredited Alesina.

Speaking of whom it is nice to see that he can still get speaking gigs from the ECB – it has not been a good global financial crisis for economists from Harvard so it is very charitable of them (and including him is a calculated insult to everyone outside the hard currency neoliberal cult, make no mistake.).

I guess the tone of the round table is more proof, if any was needed, of the grip extreme reactionary positions (and delusions) have on European institutions. Hayek must be shivering with malevolent pleasure in his grave.

As they refer to in Brussels.. Expansionary fiscal contraction – the core idea behind austerity. Now it is called “Fiscal Consolidation”. I just call it WRONG! But at best, it will be expansionary fiscal contraction for the weaker elements in society while the stronger do the imposition. There is no possibility of “optimum” because the people who need to be included to make it “optimal” simply refuse to participate and have very strong unions to make sure they don’t participate.

Funny thing is, they are the group that produce all the erudite papers organise all the conferences, produce all the papers and contribute to all the Journals and produce all the statistics. In short, we are doomed to have sub, sub optimal solutions.

Imagine erudite people having an influence. Better to leave it in the hands of the ignorant.

@ Dearg Doom

There were people who thought they knew more about literature than James Joyce, knew more about poetry than WBY and knew more about economics than JMK’s.

Our “erudite” leaders told us this was going to be the “cheapest bailout in the world”, though later, they pointed out that they also said “so far”. “cheapest bailout so far”! Ah yes, we should have been paying better attention. Then, there was that classic distillation of NAMA by our legal and political elites, “only game in town”. Our governor of the CB told us that having examined the books with all his learned colleagues, that paying off bondholders would be “manageable”. Shortly afterwards it was discovered, unfortunately, that it was not “manageable” after all, and an apology was issued, but the billions had at that stage weggeflogen all the way back to Germany and France. As for “better to leave it in the hands of the ignorant?

Well, that is precisely what we did.

I looked through the first 3 presentations.


I estimate, that I have read about 5000 papers, 1000 patents in my life,
sometimes with real potential beef attached to it.

Is there anything in the other 3 you want to point to?

The optimal design of fiscal consolidation programmes

1. Try to keep the patient alive

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