From Europe…

There are important things happening in Pakistan, Syria, and Latin America — but we will have to get to them later.

This week I am in Europe;  London yesterday, Berlin today and for the rest of the week.

I know we think we have vigorous debates over immigration and economic policy and elections in the US.  But here, this week, among the intellectuals, pundits, and policy types I meet, the anxiety and excitement is palpable.  Will Hollande’s likely win on Sunday lead to a new, anti-Merkul antiausterity alignment from France to Spain to Italy to Greece?  What will happen to the EU and the Euro, now that Europe is sinking quickly into a significant recession and the boost from the ECB’s long-term borrowing is apparently played out?  Will the banks, which were spurred by the ECB to take on ever more sovereign debt, survive or need further bail-outs?

I have to say I am struck by the contrast between the policy expert blogs, which debate macro-economic policy and growth statistics, and the real life of ordinary people as conveyed to politicians.  Against the demands from the policy elites (those of a conservative fiscal stripe) that austerity needs to be given time to work is the real life tragedy of people who cannot wait more than two years for policy to improve the economy.  For most folks, who might have a few months of savings, to spend two years in suffering and then return to depression is simply devastating — their savings are gone, their kids have given up looking for work, they have no idea how to pay their taxes or mortgages or rent.   This IS now a depression for many in Europe, and for a few in the US — and no end is in sight.  So governments will fall and people will riot unless concrete trends start to give reason for hope.

Even in the US, economic growth of 2% or so is simply not enough to create a recovery.  If we were at 4% unemployment, then 2% growth would be fine; enough to keep the economy kicking along.  But after four years of recession, this is DEEPLY disappointing.  And the latest jobs data in both Europe and the US is sad (unemployment is reaching the highest levels ever recorded in Europe.)

So all are looking to France on Saturday to try to discern the future.  Will Hollande save Europe by pulling it away from austerity policies and focusing on short term and long term growth boosting policies?  Or will Hollande lock horns with Merkul and create a deadlock in Europe that undermines the stability pact but puts nothing in its place?   Stay tuned; it will be a rollercoaster ride in the politics of the EU.

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About jackgoldstone

Hazel Professor of Public Policy at George Mason University
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