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Fiscal stimulus via ‘helicopter tax credits’

Fiscal stimulus via ‘helicopter tax credits’

The effect of the clauses will be way much less pro-cyclical than cutting public expenditure and/or raising taxes, as under EU rules, given that they wouldn’t normally drain purchasing power from the economy and would only replace TCCs for euro in investor portfolios.

By combining the introduction of TCCs with the above safeguards, each Eurozone country can trigger a robust recovery while fulfilling the Fiscal Compact and the OMT programme announced by the ECB in 2012, whereby a country’s public debt is guaranteed by the ECB for as long it commits to balancing the budget also to gradually reducing the general public debt-to-GDP ratio (to 60%). Currently, crisis countries lack the instrument to execute countercyclical macroeconomic policies. The TCC programme would provide that instrument, while preventing the ECB have to guarantee increasing volumes of public debts – as TCCs aren’t to be reimbursed, issuing countries can’t be forced to default on them, making the ECB guarantee unnecessary.