Inequality dispalys countercyclical movements. There are many channels through which monetary policy impact on inequality. One channel is through income effects of changes in returns on assets which depend on the net asset position of households. Another is through general equilibrium effects impacting more directly on lower income households. In my own work, we have looked at the impact on interest rate spreads between borrowing and savings rates which affects the extent to which households can self-insure against income shocks. This channel is quantitatively important. Monetary policy in itself may not be able to address the issue, will most likely have to work in tandem with fiscal policy (through transfers) and with financial sector regulation (through spreads).

Lots of water have passed under the bridge since the fiscal rules were formulated. We have now the ESM and we have also experienced two very large recessions and a sovereign debt crisis in Europe. It is time to revisit the SGP and the fiscal rule set: Does it serve its purpose? Do the rules allow countries to manage crisis periods? How effective are they in addressing moral hazard, how does the existence of the ESM affect this? The set of rules are also very complicated which is unhelpful. In sum, it's time go back and do some serious work on this. Good fiscal rules are helpful in anchoring expectations, bad fiscal rules can hinder stabilization.