The fiscal stance and economic coordination in Europe

On the 30th of August, Governing Council of the ECB decided to lower the key interest rates by 25 basis points. May be this decision was the only available in view of the evolution of core inflation in Europe, but for reasons made clear below, it is not going to ease the fiscal debate in Europe. In his introductory statement, President Duisenberg said “under the present circumstances, the automatic stabilisers should only be allowed to work fully in those countries whose budget positions are closed to balance or in surplus”. What should one think of such a position?