IMF economists Olivier Blanchard and Daniel Leigh take a middle-of-the-road view on the question of stimulus vs. austerity and multipliers vs debt/gdp ratios. They are cogent, if a bit tepid, recommending stimulus, or at any rate "slower consolidation," now and adjustment later. I can't help thinking of Polonius's advice to his son: "Neither a borrower nor a lender be." Easy for a comfortable old miser to say to an impetuous youth.
Meanwhile, the Blanchard-Leigh position seems to have become the default policy position of the European Commission as well. Olli Rehn announced yesterday that austerity pressures on several countries would be reduced. France, which the Commission expects to contract by 0.1% of GDP next year (vs. a French gov't forecast of 0.1% growth) was given a reprieve in its mandate to reduce the budget deficit to under 3% of GDP, It now has two years to accomplish this trick, and in the first year the EC actually expects France's debt ratio to rise to 4.2% from the present 3.9. Unemployment will also continue to rise, contrary to François Hollande's promise to "bend the curve."