ABOUT THAT SCLEROSIS....

ABOUT THAT SCLEROSIS. The economic performance of the large continental European economies -- France, Italy, and Germany -- really does leave a great deal to be desired. That said, the American press seems dogmatically determined to vastly overstate the extent of the problems. This editorial in my morning paper argues that "European governments seem unable to summon the strength even to address the economic sclerosis eating away their prosperity -- much less challenge American power." Mixed metaphor aside, Europe isn't becoming less prosperous. Rather, it's becoming more prosperous at a slow rate. If Europeans were actually getting poorer, then I think you'd see much more electoral support for dramatic changes.

As things stand, it's always worth noting that European economic growth could be boosted rather easily if the European Central Bank would loosen monetary policy. My understanding is that they've been maintaining a tighter-than-necessary monetary policy in order to deliberately provoke economic pain in the hopes that this will inspire voters to agree to adopt additional labor market flexibility and cuts in social welfare expenditures. Europeans probably should make their labor market more flexible (I'm radically less convinced that Europe's big welfare states are a problem) but European elites should consider the possibility that this would be easier to accomplish under conditions of prosperity. Obviously, nobody's going to want to make it easier to fire people under conditions where nobody has a reasonable expectation of getting a new job after they're laid off.

--Matthew Yglesias

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