High Public Debts and Low Interest Rates - Olivier Blanchard

The last financial crisis has left a legacy of low interest rates but also of higher public
debts in several countries. Low interest rates create room to use expansionary fiscal
policies to lift aggregate and demand and expand public investment, but high
public debts and ageing populations push in the opposite direction. In this new
environment, should fiscal rules in the Eurozone be reconsidered, and how? Is there
a need for greater coordination between fiscal and monetary policy, and if so should
the Maastricht rules preventing debt monetization be relaxed? For how long can
Italy keep procrastinating debt stabilization without triggering a financial crisis?
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