Editorial Board
Budget Advice for the EU's Big Three
Germany, France and Italy face different challenges. Here’s how to get fiscal policy right.
Actually, it’s France that’s in the middle.
Photographer: Sean Gallup/Getty ImagesIn a fresh sign of confidence about the euro zone’s recovery, the European Commission has just upgraded its growth forecasts for the bloc. This raises a question: Should governments now start tightening fiscal policy to put their public finances on a sounder footing?
It depends. Many euro-zone countries have worryingly high levels of public debt, and the best time to lower them is when economies are expanding. But they aren’t all in the same position. For some, such as Italy, tighter fiscal policy is essential. For others, such as France, it’s less urgent. And Germany is yet another case: Looser fiscal policy, with lower taxes and more public investment, would make most sense.