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“Forget everything you knew about public debt and budget deficits. No government, regardless of which party it is formed from, will be forced and will not force itself to tighten any fiscal belts. We live in a completely different world, which is not describes in no economics textbook.The experience after the global financial crisis, when many European countries were forced to urgently cut costs, increase taxes and try to live as fast as possible, remains only in textbooks of history, ”writes Swedbank’s chief economist on Facebook.
According to him, the 2020 pandemic very quickly changed the entire economic paradigm: Europe deactivated all the rules of fiscal discipline, all countries did not try to balance public finances, as they did a decade ago, but they further inflated deficits.
The economist points out that in Germany, fiscal stimulus – budget increases, tax cuts, loan guarantees and other measures – amounts to almost 40%. GDP in France – almost 25%. GDP. Even Italy, which has one of the world’s largest debts and has repeatedly been unable to obtain reasonably priced loans over the past decade, has said it has allocated more than 35% to economic stimulus. GDP.
“Where does that money come from? Who lends to these governments? ”Question N. Mačiulis. – Unless there is someone to lend to, central banks stretch an inexhaustible furnace, printing and lending money at an unprecedented rate. In recent months, both the European Central Bank and the United States fedas “Printed” about three trillion euros / dollar each (here for more than 100 years the GDP of Lithuania). He lends newly created money at negative interest rates, buys public and corporate debt securities and thinks every day about how to increase the money supply even more, what to buy, what to lend to, what to give ”.
According to him, we live in a completely new world: “The world’s most indebted countries borrow at negative interest rates, they are paid to borrow money. Nobody cares about those budget deficits and those public debts, they remained in the textbooks of the last decade and of the last century.
Economists, politicians, governments and central banks are thinking about a new economic paradigm, MMT (modern monetary theory or dissension is ridiculously called magic money tree). In essence, you don’t have to collect taxes to fund public spending if you can … print the money. Let’s take it into account: why raise money from taxpayers in the budget, if that money can be printed and distributed. “
This, as they say, does not mean that such a policy will not have negative consequences in the future, such as a faster depreciation of money. “But for now, everyone climbs the magic money tree with a smile and does not think about how to get out of it. And no, this does not mean that Lithuania can spend the non-refundable or free money received anywhere, to any person and in any way. The need to use these funds responsibly and with your help to create potential for future growth has not disappeared. In this new world, we need to discuss not how we will return this money, but how we will use it, “he wrote the economist N. Mačiulis on Facebook.
The 2021 budget approved by the government foresees a general government deficit of 5%. Gross domestic product (GDP). Other economists have criticized such a large deficit.
“If Germany promises to balance the budget in 2022, other EU countries will have to follow suit, so it is very likely that the belt-tightening narrative will return in 2022. So I would suggest not straying too far from Germany, it is In other words, the budget deficit should be similar to, but not higher than in Germany ”, Sigismund Mauricas, Luminor’s chief economist, reacted to N. Mačiulis’s recording.
Previously on Facebook, he wrote: “The budget deficit is not the category that should lead in 2021, because if in 2020 all eyes (of fear) are on the number of COVID-19 cases, then in 2021 all eyes ( fear) will be placed in state budgets. number of deficits. Lithuania today presented a budget for 2021, which forecasts up to 5 percent. GDP deficit. This is (too much), especially considering that the Lithuanian economy will contract the least of all EU countries in 2020 (IMF forecasts released yesterday forecast a drop of just 1.8% of GDP for Lithuania).
Given that the budget deficit will be higher than in Germany or Sweden (and the EU average), Lithuania is likely to attract the attention of international investors and rating agencies, so we will get a lot of uncomfortable questions … that we should not stand out from the crowd. It is not difficult to do this, because the Lithuanian budget is not currently experiencing a revenue crisis. August. revenue has already exceeded last year’s level. However, we have created a spending crisis ourselves due to extremely generous payments in 2020 and even more generous promises in 2021, so all we have to do is “curb the horses” and the deficit will fall on its own (that is That is, no tax increases or cuts, just a reduction in budget growth).
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