Lorenzo Bini Smaghi, a former executive director at the European Central Bank, explains why Germany’s former finance minister’s recent push for a return to “normal” is misguided. As the recovery strengthens, discussions have started in Europe on how and when monetary and fiscal policies should “get back to normality”. Wolfgang Schäuble, the former German Finance Minister and current president of the Bundestag, recently underlined in the FT the need to reinstate fiscal rules as soon as possible. His statements were made with a view to pressure high debt countries to reduce their budget deficits and avoid moral hazard -- a similar line of thinking as before the pandemic struck. Yet this assumes the years prior to Covid-19 were “normal”. They were not. In fact, they weren’t
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Lorenzo Bini Smaghi, a former executive director at the European Central...