November 25, 2012

Should Europe Emulate the U.S.?

Jean Pisani-Ferry, Project Syndicate

AP Photo

Neglect of the private sector has left Europe in a sad quandary. On the supply side, permanently lower output makes fiscal adjustment even more compulsory; but, on the demand side, a weak private economy lacks the resilience needed to weather fiscal retrenchment. At this stage, struggling European countries evidently cannot afford to put public-sector adjustment on hold to concentrate on private-sector balance sheets. Nor should they take inspiration from America’s “fiscal cliff” theater. Nonetheless, the US approach holds three lessons.

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TAGGED: Banks, Germany, UK, Eurozone, Europe, United States

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