The 2008 financial crisis had a double whammy effect on the economies of the
Fast forward to the present day, and
So what to do? According to the IMF, the ECB needs to move to full scale quantative easing. That's sage advice indeed, and the ECB would do well to heed it closely. In effect, what Lagarde is saying is that it's time more money was put back into economies to spur growth; deposit rates need to be low as savings sitting there are better put to use in circulation, funding new ventures and creating jobs; healthier banks after years of stress tests need to focus on lending funds to finance new businesses or startups to bring more people into the workforce; and the ECB should adopt policies that end the deflation threat.
But the ECB is not a fiscal island onto itself. For the IMF's advice to be effective, national governments now need to end policies of austerity that cut public sector spending and slashed social programmes. Now is the time to borrow wisely for positive growth, provide incentives for meaningful job creation and cut personal and corporate taxes to bring more people into the workforce and allow those with jobs to spend on consumer goods and services.
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