The past week saw the first European summit since the inconclusive Italian general election. Leaders have agreed to allow greater flexibility around public investment when setting budget deficit targets. This is an important and welcome development. Harsh front-loaded austerity has sacrificed an important balance between growth and austerity. Austerity is important, but so too is economic growth: in fact higher growth is the only viable pathway to putting troublesome debt to GDP ratios onto a downward trajectory.
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