Blanchard: Europe’s weapon for next crisis is fiscal policy

FRANKFURT: Government spending must play a greater role in bolstering the eurozone economy in coming years, even if that means bigger budget deficits, according to Olivier Blanchard (pic), the former International Monetary Fund chief economist.

Speaking at the European Central Bank’s (ECB) policy forum in Sintra, Portugal, Blanchard praised president Mario Draghi’s resolve in deploying negative interest rates, large-scale asset purchases and long-term bank loans to help the 19-nation region recover from the global financial crisis. But he also argued that those efforts have left policy makers with little room to handle future economic shocks.