Fiscal policy differences in Euro area cast doubt on coordination.
The article looks at how non-systematic fiscal policies affect the economies of the four largest Euro area countries. It finds that these policies have different effects across countries and can be uncertain in their impact. Spending increases don't always boost economic growth or stability, and may need deficit funding. Tax changes also don't have a big impact on the economy, and tax cuts might require deficit funding too. Fiscal policies can influence interest rates, either directly or through inflation and output gaps. Monetary policies, on the other hand, seem to have minimal effects on government spending and revenue.