We have to behave like the austere Germans

AS we approach Budget 2012, the speculation has started about what it might or might not contain and about the appropriate level of fiscal austerity at this stage of the economic cycle.

The trade unions and others continue to argue that the Government’s stance on the public finances is incorrect and that fiscal stimulus would be more appropriate than the austerity we have been subjected to since 2008. They tend to argue that fiscal tightening is sending the economy into a tailspin and is a counter-productive policy response.

The evidence tends to suggest otherwise. Over the past year, we have seen increasing evidence that economic activity is stabilising, albeit after a dramatic collapse in 2008 and 2009.