via Krugman, Jean-Claude Trichet, June 2010:
One cut after another: many economists say that there is a clear risk of deflation. What are your views on this?
“I don’t think that such risks could materialise. On the contrary, inflation expectations are remarkably well anchored in line with our definition – less than 2%, close to 2% – and have remained so during the recent crisis. As regards the economy, the idea that austerity measures could trigger stagnation is incorrect.”
“Yes. In fact, in these circumstances, everything that helps to increase the confidence of households, firms and investors in the sustainability of public finances is good for the consolidation of growth and job creation. I firmly believe that in the current circumstances confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.”
How Does the Economy Choose Which Equilibrium to Settle at?: Praying for the Confidence Fairy to Rescue Italy Edition by DeLong
Martin Feldstein claims that Italy does not need anybody else's help: