Attēlā redzama Itālijas Pjemontas reģiona bankas "Intesa Sanpaolo" filiāle Turīnā. Pār Itālijas banku sektoru patlaban gulst smaga ēna - bankas apgrūtina 360 miljardu lieli "sliktie" kredīti, bet finanšu tirgus nespēja atrisināt šo problēmu var radīt jaunu eirozonas krīzi. Foto: AFP/LETA
Part II - lessons from Italy
In my previous post I presented some arguments against additional deficit spending in Latvia even in the face of low interest rates. Here is an additional argument, which I chose to present in a post of its own not to make the previous one too long. And because it is very important in and by itself by addressing the main problem of government fiscal policy: The tendency for deficit bias.
At first one might argue that Latvia has plenty of scope for additional spending since its government debt, at 36% of GDP, is very low by EU standards, see Figure 1. Actually so low that it is comfortably within the 60% Maastricht criterion, a criterion only fulfilled by 11 of the 28 countries at the moment (up to and including Slovakia).
Figure 1: Government debt as % of GDP, EU28, 2015 (Eurozone countries in red)
