Europe therefore needs fiscal policy to support growth in the real economy while also ensuring that sustainability over the medium term is secured.

To maintain economic stimulus and fiscal sustainability at the same time, policymakers should:

• cut interest rates to near zero and switch to a quantitative easing of monetary policy, so that government investments can be financed at a low cost of interest;

• enlarge public investment spending since this has a bigger and certain impact on the economy than simply cutting taxes;

• create a European Debt Agency to suuport individual member states that are confronted with high interest rate spreads, brought about by misguided ratings agencies and unfounded financial market panic behaviour;

• address the problems of harmful tax competition, in particular those of tax havens and taxation on capital income such that, when recovery kicks in, governments have tax revenue at their disposal to pay off the public debt.
  
  

Says John Monks, ETUC General Secretary: ‘There are those who think that policy needs to choose between saving the real economy and saving public finances. This approach is doomed to fail. Instead, we need a fiscal policy strategy to allow the economy to grow out of debt’.