The importance of the financial sector in the global economy has grown immensely in recent decades and has diverted considerable resources and attention from other sectors of the economy. The impact of the global financial crisis of 2008 has been – and continues to be – enormous in terms of unemployment, income and the costs to public finances. Even if some progress has been made since then, much remains to be done, especially at the European level, so that financial markets regulation can ensure maximal welfare. Read the 12 propositions by Finance Watch!
The importance of fiscal policy,
Financial markets and the real economy must be viewed together in terms of economic policy, because only a good interplay between financial market policy and fiscal policy allows effective overall control in an economic crisis. The consequences of the global economic crisis after the financial crisis were further exacerbated in the EU by a restrictive fiscal policy – ” austerity” – while in the USA the Obama administration relied on stimulative fiscal programs and the recession in the USA was thus overcome more quickly.
A new consensus has asserted itself in this area as well: If the central bank is already at its limits to act at a zero interest rate, active fiscal policy should be pursued in order to come out of a long recession more quickly. The long-standing stagnation of the Eurozone economy was a consequence of the implementation of the political priorities and views of conservative and neoliberal forces. This cost the European economy and the population a great deal, and thus indirectly contributed to the influx of populist movements.
The real economy needs functioning, robust financial markets that serve it and do not decouple as an end in themselves; we all need stable financial markets in order not to suffer the fatal consequences of a new financial crisis. Good financial market regulation is central to this.