Osborne insists that Britain will enjoy what he calls "expansionary austerity", because the knowledge that the government is getting to grips with the public finances will engender confidence and encourage private spending to replace the cuts in public spending.
That takes the form of eliminating structural deficits and decreasing public-debt/GDP ratios in expansionary times, but that is really just score-keeping for the underlying purpose.
That would put domestic political pressure on the Bundesbank to engage in expansionary policies, and German central bankers like nothing less than expansionary monetary policy.
However, if interest rates are expected to stay low indefinitely, this short-term expansionary effect is weakened.
Dave McClure, oops, Simplyhired. com, get $3m VC or should I call it expansionary seed to move beyond 3. 5m jobs?