Olivier Blanchard and Jeromin Zettelmeyer believe that Italy right now is one of those rare cases in which fiscal expansion is likely to be contractionary: Olivier Blanchard and Jeromin Zettelmeyer: The Italian Budget: A Case of Contractionary Fiscal Expansion?: "Putting fiscal multiplier effects and contractionary interest rate effects together—and being generous about the size of the multiplier and conservative about the effect of the interest rate increase—arithmetic suggests that the total effect on growth will be 0.8 * 1.5 – 0.8 * 1.6 ≈ –0.1... [with] risks are skewed to the downside. This means that the planned fiscal expansion will probably fail to increase growth—and may even reduce it. The deficit will come in larger than predicted. Supporters of the government will be disappointed. The government may double down, and investors may flee, leading to a serious crisis. It is possible that Italy will suffer a debt run before it even gets a chance to implement its expansionary budget...


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