A Keynesian Recovery Policy for the European Union


The European Council’s decision in February 2013 to cut the EU budget to 1% of GDP was a grave error, worsening the European economic recession and tacitly admitting that a European recovery policy is impossible. In this paper the authors show that with an annual EU budget of only 1.19% of GDP, a recovery plan of 2% of GDP is possible, without deficit spending. The twofold aim of this exercise is to show that within the present legislative framework European parties and leaders can put forward an effective economic policy to overcome recession and that European fiscal imbalance is one of the major causes of the crisis of the European misgovernment. A more effective policy can be fostered with a limited federal debt.