- "All OECD countries will have to reduce their fiscal deficits significantly over the next few years. If nothing bolsters the economy, this will lead to a marked reduction in growth, with, moreover, the slowdown in activity being amplified by foreign trade between these countries."
- ""Ricardian neutrality" gives a very partial view of what may be a compensatory mechanism: if there is a reduction in government expenditure, private economic agents expect a reduction in taxes - and hence additional income - in the future, and they accordingly spend more in the short term. However, more generally speaking, what is needed when fiscal deficits are reduced is the expectation that growth will accelerate in the future: governments must show why and how growth will become more robust in the long term than today. This generates expectations about higher incomes in the future (i.e. beyond the short-term effects of fiscal policies)."
- "This has a number of important implications for the fiscal deficit reduction programmes:
• if a hike in certain taxes (welfare contributions, taxes on corporate earnings in countries where profitability is low) would reduce potential growth, these specific taxes should not be increased;
• likewise, government expenditure that is favourable for long-term growth should not be cut (on the contrary, in fact);
• an economic strategy leading to higher growth with quality jobs in the medium term must be established (for example, maintaining a large sophisticated industry in Germany; development of green industries in the United States, etc.). Focusing economic policies on obtaining short-term results (Spain, France, United Kingdom, etc.) may have disastrous results."
Natixis Flash Economics 367 20100716
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