Should Europe Do More To Stimulate The Economy?
  Analysing the continuing rift between Europe and the U.S. how best to overcome the financial crisis, Robert Kuttner argues that both are right. President Barack Obama, writes Kuttner, is correct to demand that European countries, especially the continent's biggest economy Germany, do more to stimulate spending. But the Europeans are equally right to demand that international regulation of the financial system is given high priority.

While I generally agree with his analysis, he and many other critics of Europe's alleged meager stimulus policy, miss an important point. Compared to the U.S. many European countries have a much tighter social security and welfare net. In times of crises, this provides an important buffer against the most severe effects of the recession. In other words: The social and welfare act as a kind of automatic stimulus in many European countries. If those effects are factored in, the size of the German stimulus package for instance is basically on par with that of the U.S. An excellent analysis of this phenomenon can be found of all places in the Wall Street Journal.
Michael Knigge 19.03.2009, 21:49 # 0 Comments
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