The Problem with Monti Structural Reforms is Deflation

(from Economonitor, RGE, 2 Dec 2011) The program of fiscal consolidation +  structural reforms that the Monti government is envisaging, in line with EU and OECD recommendations could be derailed by deflation +  recession. The Aggregate Supply – Demand framework (AS-AD) in the figure helps making the simple point. Budget cuts (particularly tax hikes and […]