© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
The term “voodoo” economics was originally aimed at the Reaganite right – and, specifically, their belief that cuts in taxes would pay for themselves through the higher growth they generated. Now, in Greece, the new Syriza government has come up with a left-wing version of voodoo economics: the belief that a spending splurge will pay for itself, if it is just pushed with enough energy and determination. Unfortunately, given that Greece’s starting point is immeasurably weaker than that of the US in 1980, the Greek experiment with voodoo economics is likely to come crashing down – and quickly.Read more
Yet, despite steep cuts to interest rates and several rounds of cheap loans to banks, the eurozone is still struggling to get enough investment projects off the ground. Last week, the ECB launched an ambitious programme of quantitative easing aimed at prompting banks to lend more by lowering the interest they receive on government bonds.
But what if Europe’s investment problem was not the result of a shortage of liquidity?Read more