Barry Eichengreen: Fiscal Fibs and Follies

Barry:

Fiscal Fibs and Follies: Southern European firms... understand that their countries’ fiscal positions are unsustainable... that debt default would be disruptive... they are holding their collective breath, while evidence that the government is serious about stepping on the brake can induce them to exhale. In this case, fiscal consolidation is likely to affect their investment spending positively.

This does not mean that Greece, Portugal, and Spain will expand as robustly as...