europe

EU success or crisis?

EU success or crisis?

The German Finance Minister Wolgang Schauble has been a strong advocate of austerity, supply side reforms and ‘sound money’ policies. (i.e. sticking rigidly to inflation targets). Generally, this has been the preferred approach of Europe to the ongoing debt crisis and recession of the past few years. Recently, he has claimed that the European economy is recovering well and this is vindication that the broad approach of fiscal discipline and structural reforms are laying a foundation for strong economic growth in the future. Writing in the Financial Times, Schauble states:

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Should the UK stay in the European Union?

In the past few years, there have been a noticeable increase in the calls for the UK to consider leaving the European Union. A few years ago, we may have enjoyed complaining about EU directives on the bendy banana (which didn’t really exist) but it was taken as almost sacrosanct that membership of the EU was in the UK’s interest. What has changed and would we really benefit from leaving – and negotiating a free trade agreement, which enables the benefits of EU membership without the supposed costs? Should We stay…

Could US Make Same Mistakes as Europe?

Could US Make Same Mistakes as Europe?

In 2009, US and EU unemployment rates both stood at 10% – but since then EU unemployment has increased to 12% and US unemployment fallen to 7.9%. (see: US v EU unemployment) These contrasting fortunes in unemployment are a reflection of diverging rates of economic growth. Whilst, Europe has entered a double dip recession, the US has experienced a sustained economic recovery. It is also a reflection of different economic policy – the EU has become obsessed with reducing budget deficits, the US has given more focus to promoting…

Why Did Europe Expect Fiscal Consolidation to Work?

Why Did Europe Expect Fiscal Consolidation to Work?

Readers Question. Can you explain why the Government and Economic Commentators  are talking about a multiplier (in relation to budget cuts) of between 0.5 and 1, whereas I always thought that the GDP multiplier was bigger than this. Just to summarise a multiplier of 0.5 would mean fiscal consolidation (spending cuts) of £1bn, would lead to a drop in GDP of only £0.5bn. In other words, they hoped fiscal consolidation would be successful and only have a limited impact on reducing economic growth rates. However, evidence from the IMF and…