How much control do our government have over fiscal policy?

euser1984

If any? I've had a quick look at the bailout terms; it more or less says to me that all out financial decisions are now made by our creditors (EU-IMF)....

KomradeBishop

Control over monetary policy and the currency you use, has a huge effect on how much control you have over fiscal policy:
https://en.wikipedia.org/wiki/Interaction_between_monetary_and_fiscal_policies

When you have a monetary union like the EU, things get really complicated, and stuff like trade imbalances across different currency union nations, can affect countries economies and restrictions on their fiscal policy, in very complicated/dynamic ways.

Then you add in stuff like the Stability and 'Growth' Pact, which puts a limit on deficit spending, and there are a lot of political restrictions on EU countries fiscal policy now as well.


My personal impression, is that EU countries still have some amount of say in how they distribute spending/taxation in fiscal policy, but no longer much of a say in how much net-spending there will be when it comes to fiscal policy.

We can no longer unilaterally engage in e.g. a large Keynesian fiscal stimulus (large public spending boost), we have to negotiate that kind of thing with the EU, and the way things are now, means this is practically impossible politically.


Countries with their own currency, don't usually have these kinds of problems - especially if they have a strong enough currency.