Sunday, March 29, 2009

Why the EU can't do stimulus programs

If Paul Krugman has a weakness, it's that he doesn't work very hard to explain why governments don't want to follow his (well reasoned) recommendations.

The NYT's coverage of the ceremonial G20 meeting has the first justification I've read of why the EU doesn't feel able to do an economic stimulus package ...
Obama Will Face a Defiant World on Foreign Visit -

... Compounding the problem for Mr. Obama is that the route that he has chosen to lead the United States out of the mess — heavy government spending — is not available to many other countries. European governments, for instance, are far more lukewarm about enormous stimulus programs because they already have strong social safety nets, and more fears of inflation, than does the United States...
Our social safety net has been destroyed by 12 years of GOP obstruction and 6 years of total GOP control. So even rebuilding it partially is a huge governmental economic stimulus. The EU can't double government spending programs because then the government would be most of the economy.

The can do the modern equivalent of printing money, but that may be a lot harder to do with a single currency spread across very diverse nations.

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