The Brussels Report Podcast Episode 27 on the state of public finances in the Eurozone – with economist Daniel J. Mitchell

The Brussels Report Podcast

BrusselsReport.eu

News, Politics

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🗓️ 22 December 2022

⏱️ 53 minutes

🔗️ Recording | iTunes | RSS

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Summary

Daniel J. Mitchell is a public policy economist based in Washington D.C. For years, he has been extensively commenting fiscal and budgetary policy in the OECD, having served as a Senior Fellow at the Cato Institute and the Heritage Foundation, as an economist for Senator Bob Packwood and at the Senate Finance Committee, and as a Director of Tax and Budget Policy at Citizens for a Sound Economy. He is also the founder of the Center for Freedom and Prosperity and often comments on fiscal and economic policy on his blog.

This podcast is an audio record of a Brussels Report seminarrecently hosted in Brussels, in cooperation with the Tholos Foundation, where Daniel J. Mitchell discussed the state of public finances in the Eurozone, exploring the following questions. This against a background of European governments engaging in yet another round of budgetary expansion as a response to the energy crisis, after stretching their fiscal capacity to deal with the consequences of Covid lockdowns, all amidst increasing interest rates and with a monetary union with only shaky political underpinning.

- How bad is the situation really for Eurozone governments?

- Could this ultimately once again threaten the monetary union?

- Which fiscal and economic policies can governments pursue to stimulate economic growth to alleviate debt levels?

- Which Eurozone member states are mostly in trouble?

His presentation can be downloaded here.

https://twitter.com/danieljmitchell/status/1586415034296852480

Transcript

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0:00.0	the Brussels.
0:06.0	The Brussels Report podcast.
0:14.0	Well, thank you very much. I'm going to talk about public finances in the Eurozone,
0:19.0	but it's really could be considered public finances in the Eurozone, but it's really could be considered public
0:21.7	finances in the Western world, because very, very few countries are escaping that, whether
0:27.2	you're talking about non-Euro using countries, whether you're talking about the United States,
0:32.3	Canada, North America, a lot of the developed Pacific Rim countries. What we're basically
0:37.4	looking at is a story about bad physical policy or suboptimal fiscal policy,
0:43.4	which in and of itself might not be a huge problem.
0:46.8	It might simply be, okay, you're going to grow a little bit slower as compared to some other countries.
0:52.0	But when you marry it to demographic change,
0:55.6	that's where I think you see a very, very grim long run picture.
1:01.0	And I'll go ahead and make a slight point at the end that it's not just fiscal policy
1:06.7	that should be concerning us.
1:09.1	And probably the chart to start with. This is from the
1:12.3	Our World and Data website at Oxford University, and this is looking at social spending as a share
1:18.4	of GDP, and not just European countries. I have like the U.S. in there, Australia and others,
1:25.7	but basically starting in the 1930s and really accelerating in the 1960s, the social
1:31.6	welfare state was created and expanded.
1:34.3	And that had dramatically changed the size of government in Western societies.
1:39.4	Before the welfare state, government's spending consumed less than 10% of GDP and just that every Western
1:46.5	country. Obviously, you could earn worse. It spiked upwards, but the steady state normal equilibrium
	...

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