ABSTRACT
As Europe is heading into its fifth consecutive year of economic crisis, there are more and more voices that question the rationale of the economic policy being followed, especially in those countries, such as Ireland, Spain, Greece or Portugal, that, due to their weak situation in terms of access to the financial markets, are obliged to follow more closely the “recommendations” of the European Commission. As is well known, a core element of EU economic policy is the belief that the reduction of public deficits is a necessary condition to regain growth, 1 considering other possible alternatives as wishful thinking. Oddly enough, this was not the approach followed by the EU and the Member States at the start of the unexpected crisis in 2009 when, for the first year, the EU embraced a Keynesian interpretation of the crisis and argued that the proper response was to increase public expenditure and let the automatic stabilizers take care of the existing lack of effective demand. As the working of the automatic stabilizers was considered to be insufficient due to the intensity of the recession, a discretionary increase in expenditure was proposed. In the words of two functionaries of DG ECFIN (Fisher and Justo 2010): “Despite quickly deteriorating fiscal positions, the concerns about using discretionary fiscal policy for stabilization purposes were overridden by the greater concern about economic developments and the risk of economies being locked into a state of depression” (p. 1).
