A crucial question with regard to public finances in European Monetary Union is whether the right cure is to prescribe frontloaded consolidation for all euro-area countries. A considerable number of experts are vehemently opposed to this approach. Paul Krugman, for example, sees the euro area spiralling into disaster.
And George Soros is accusing many − including the Bundesbank, with its emphasis on frontloaded consolidation − of destroying the euro. It will hardly come as a surprise to you that I do not share such views. Rather, I suggest that dragging out fiscal adjustment would have major negative effects.