Tuesday, January 31, 2012

Why (Some Parts Of) Europe Underperforms

Interesting Wall Street Journal editorial which discusses why European growth has been weak for so long-namely demographics and excessive government spending. The article mentions Germany and Sweden as two countries that are "better run", which is basically true, but the point that could have been added was that their better relative performance is mostly because they have implemented tax- and social benefits cuts.

Germany by the way is an example of how countries in the short run can compensate for the effects of a shrinking working age population by employing a higher percentage of the people in that age group. They still have room to increase the employment rate for a few more years but with a 5.5% unemployment rate there is a limit to that. Perhaps Germany should encourage some of those newly unemployed Southern Europeans to learn German and move to Germany?


Blogger Shane Leavy said...

Yes it's interesting to see the great diversity of unemployment rates in the EU right now, from today's Eurostat figures.

Austria: 4.5%
Spain: 22.9%
EU27: 9.9%

Though I seem to remember not too long ago that Germany was the troubled European economy, with very low growth and high unemployment while other countries grew fast. I gather the integration of the old East Germany was part of the problem, but I don't really understand the revival.

11:52 PM  
Blogger stefankarlsson said...

Shane, I mentioned the cause of Germany's revival briefly in the post, here is a post specifically analyzing the subject.

8:48 AM  
Blogger Shane Leavy said...

Great, thank you Stefan.

10:16 PM  

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