Consequences of the Public Debt Crisis on Growth and Stability

Panagiotis Evangelopoulos

Review of Economics & Finance, 2014, vol. 4, 47-56

Abstract: This research examines the public debt crisis that caused by the financial crisis in 2007-2008 after the immense involvement of the state as last resort. The purpose is to explain the consequences of the public debt crisis on growth and stability. This paper compares the macroeconomic policy of fiscal and monetary stability that characterizes modern Germany versus the expansive model that USA authorities exercise with fiscal stimulus and monetary quantitative easing. The author concludes that the restoration of the classical American constitutional tradition that restricts efficiently the expansive role of the state is the sufficient and the necessary condition, alongside a stable Germany, for divesting the disequilibria of the world economy. A balanced and symmetrical economic policy, based on the golden rule of stability, is the most effective way for the exodus of the world economic system from the global public debt crisis and for the global economic recovery.

Keywords: Stability; Expansionism; Constitutional Tradition (search for similar items in EconPapers)
JEL-codes: D31 D63 E52 H19 (search for similar items in EconPapers)
Date: 2014
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