Due to collective action problems, the Eurozone is stuck in a sub-optimal macro-policy mix of too expansionary fiscal policy and too restrictive monetary policy. Although the Lisbon Strategy pays lip service to macro-economic policy coordination, no mechanisms, institutions or effective rules...

In this paper, the sustainability of public debt is interpreted as the result of the interaction of fiscal policy with the economic environment, and not as a statistical concept as in most of the recent literature. If debt must not explode over time, policy makers have to respond to the changing...