Wednesday, February 04, 2004
Europe Does Matter (and least half-way)
WaPo Op-ed explains why Europe's economy is in the pits:
It then explains why Europe does matter to the United States and the world:
The EU is one of the world's largest economic zones. It needs to get its act together before more fiscal imprudence digs the hole even deeper. I really don't want to be facing a tight job market when I graduate because some dolts in Germany and France can't figure out macroeconomics.
Why not? Well, the economy is so enfeebled by high taxes and restrictive regulations that it can't pay for all the benefits. The gap between promise and performance must widen and, in the process, spawn disillusion and discord. One early example involves France's and Germany's violation of the Stability and Growth Pact, requiring member countries to hold their budget deficits to less than 3 percent of gross domestic product. In 2002 and 2003, France and Germany failed and, rather than face penalties, forced other countries to suspend the rules. Naturally, smaller countries that complied were furious.
It then explains why Europe does matter to the United States and the world:
[W]hat's worrisome is that Europe isn't helping the global recovery. True, growth in the euro zone should be better this year than last -- perhaps 1.8 percent compared with 0.5 percent in 2003, estimates the forecasting firm Global Insight. But Europe is feeding off the revival of its export markets, including the United States (expected 2004 GDP growth: 4 percent to 5 percent). Even this is imperiled by the recent rise of the euro on foreign-exchange markets. It's now worth about $1.25; in December 2002 it was worth $1. Most economists think it will go higher -- maybe to $1.50. By making exports more expensive, a stronger currency could undermine Europe's recovery.
The EU is one of the world's largest economic zones. It needs to get its act together before more fiscal imprudence digs the hole even deeper. I really don't want to be facing a tight job market when I graduate because some dolts in Germany and France can't figure out macroeconomics.
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