Those reluctant Germans

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: If the worst fears of a severe global recession are realised, historians may look back and wonder why the region with the most scope to allay a downturn seemed unable to exploit it. The euro area’s collective budget deficit was 0.6% of its GDP last year, according to the

European Commission, a picture of health compared with America and Britain. On November 26th the commission unveiled a plan for a co-ordinated fiscal stimulus across the European Union worth euro 200 billion ($258 billion). It set out policies—temporary cuts in employment and sales taxes, more generous state support for the low-paid and jobless, and so forth—that might best give the economy a short-term lift. The proposals will be discussed at an EU summit in December, but the chances that they will be adopted in full seem slim.

Some reluctance to prime the fiscal pump may seem reasonable. The orthodoxy for three decades has been that monetary policy is the best tool to manage the economic cycle. It is easier to reduce interest rates in a timely way than to fiddle with tax schedules. Furthermore, there is still room to loosen monetary policy in Europe: even after recent reductions, interest rates are 3.25% in the euro zone and 3% in Britain. And both the European Central Bank (ECB) and the Bank of England have, like the Fed, proved willing to expand their balance-sheets, if not to the same degree, in order to provide liquidity to their banking systems.

Public spending is hard to ramp up quickly and harder still to cut when the economy recovers. Much of the benefit may leak to neighbours who do not bear the cost. Europe also has a more solid fiscal buttress. The public sector accounts for a much bigger slice of GDP so a drop in private spending has proportionately less impact on the economy. State benefits for the unemployed are larger than in America, so public spending rises by more in a downturn. Tax receipts are bigger too and they tend to fall quickly in downturns, providing an automatic fiscal relief for taxpayers.