State of the crisis

Policy Study

Have we already reached the botton? The question arises if the pace of contraction of GDP in Europe is really slowing down and no further fiscal stimulus are warranted. Many economic institutes are arguing in this sense. In a short note, we are arguing that firstly it is too early to speak of a recovery at the European level. There is still an urgent need for an additional stimulus. The possibility to recover from the present crisis will finally depend on the effective demand to enterprises and consequently in changing the income distribution patterns for supporting aggregate demand. The current crisis is not only a crisis in financial markets, it finds its roots in global imbalances at national, regional and international levels.

FEPS Policy Note