To: Tenchusatsu who wrote (713124 ) 5/5/2013 11:18:55 AM From: tejek Respond to European Stagnation THE EDITORIAL BOARD Economic conditions in Europe, especially in troubled nations like Spain, Portugal and Italy, have deteriorated sharply in recent months. Worse, new data released last week provides no hope for a recovery soon. The unemployment rate in the 17 countries that use the euro hit a record of 12.1 percent in March, up from 11 percent a year earlier. In Spain and Greece, more than half of the labor force under 25 is looking for work. The good news, if it can be called that, is that a barrage of negative economic data appears to have stirred European leaders and senior officials at the International Monetary Fund into finally acknowledging that the Continent’s austerity policies are imposing unnecessary pain and suffering on average Europeans while doing little to lower debts and deficits. more growth-friendly ” policies and encouraged the European Central Bank to use unconventional measures like bond purchases to increase credit and stimulate the economy. This awakening is fine as a start. But real change will come when European leaders start reversing damaging budget cuts and restructuring their fragile banks. That means changing the status quo, no easy task. For starters, countries that use the euro have committed to maintaining fiscal deficits no higher than 3 percent of their gross domestic product as part of a “fiscal compact” with one another. And despite the fact that France, Portugal and several others are already struggling to meet that cap, even after raising taxes and slashing spending, nations like Germany and Finland remain committed to austerity. This is not smart. Enforcing these limits in the middle of a deep recession will not lower labor costs, increase competitiveness and reduce debt. On the contrary, it will simply perpetuate the downward spiral that weaker countries are stuck in and foster widespread anger without providing any meaningful economic payoff. agreed to centralize the supervision of large banks under the European Central Bank by March 2014 as a first step toward a banking union. But Wolfgang Schäuble, the finance minister of Germany, recently suggested that E.U. members first renegotiate changes to the union’s treaties to clearly separate the monetary and supervisory functions of the central bank. Wrangling over technical amendments could easily delay the broader effort to put the whole financial system on sounder footing.
