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Here’s why European leaders may let an economic slowdown morph into a serious crisis

“So the odds are that European governments will wait until the slowdown degenerates into a serious crisis before they act” writes Senior Writer for marketwatch.com. Meanwhile, fiscal policy remains roughly neutral.In an era where interest rates are near zero or even negative, more borrowing doesn’t necessarily increase the debt load, as Olivier Blanchard, the former IMF chief economist, has noted.The irony is that the eurozone owes part of its greater fiscal flexibility to the central bank’s policy.The countries with high levels of public debt – Italy (more than 130% of GDP) or France (nearly 100%) can’t go on a borrowing binge, even with ultralow interest rates.
 
Source: marketwatch.com



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