Fiscal Policy and Interest Rates in the European Union is a comprehensive study concerned with the potential effects of fiscal policy on financial markets in the European Union. It takes into account the gradual liberalization of capital movements throughout Western Europe and the institutional framework of the European monetary system. Klaas Knot takes a fresh approach to the impact of budget deficits on interest rates, especially in relation to international financial integration, and concludes that the increases in European budget deficits since the early 1970s have raised interest rates in the long term throughout the Union. In conclusion he argues that balanced budget deficits are necessary to maintain low interest rates. This important new book will be of interest to students, academics and policymakers concerned with monetary and public economics.