This paper considers the case for and against 'the treasury view' - the idea that in a downturn, government spending has no effect on economic activity or unemployment. The report covers three areas: the evidence for expansionary fiscal contraction – the idea that somehow cutting budget...

With Spain’s official unemployment rate at 26 percent, and the economy projected to contract by 1.3 percent this year, it is difficult to make the case for continued austerity that could push a barely growing economy back into recession. Yet the government is committed to further fiscal...