OPINION

Commentary

The stagnation in the international economy is clearly visible. It is reflected in American economic performance, the slowdown in the Japanese economy, the problems plaguing the German one, the moves by the irresolute European Central Bank (ECB) and the constant revisions of the predictions made by the International Monetary Fund (IMF). Such economic conditions drag down stock markets, and prospects look bleak as profits shrink amid a wave of dismissals. It is not certain whether the present slowdown will turn into a recession, nor what the best remedy might be. Will there be a shift to more aggressive fiscal policies so as to curb recession or will the world insist on fiscal discipline? Strongly though economists may insist on the economic orthodoxy of budget surpluses, reality comes to question beliefs which prevailed in previous decades. In the US, the fiscal surplus of the Clinton era has quickly turned into a deficit while the majority of European economies cannot meet the requirements of the EU stability pact. At the ECB headquarters, the proponents of fiscal orthodoxy are opposed to relaxing the requirements of the stability pact set by the German and French governments. But long historical experience shows that there is no room for dogmatism in the economy. The times do not allow the resurrection of the ideological battles of the 1930s. Then, the champions of economic orthodoxy fiercely defended the logic of balanced budgets and let economies collapse under the burden of recession, accusing Keynes of being a communist because he insisted that demand has to be strengthened by public spending. Everything seems to point to that debate recurring, but on different terms. And it will also touch upon internal debates, even though Greece is a special case, due to the existence of development funds despite Greece’s poor fiscal state. Perhaps the Greek government draws comfort from its special situation, but a potential downturn in the global economy will have repercussions on the Greek one. For this reason, economic policy has to escape stereotypes, become more imaginative and decisive, and place increasing emphasis on creating conditions for sustainable growth.