Research Director of the Adam Smith Institute – Sam Bowman – argues that the Eurozone is facing a lost decade in the City AM Forum.
Youth unemployment in Greece is above 50 per cent. All Italian growth in the last 15 years has been wiped out.
And Germany’s economy, previously healthy, shrunk in the second quarter.
Across the Eurozone, unemployment is above 11 per cent, and youth unemployment is above 23 per cent. These problems are likely to persist for many years, with youth unemployment leaving a lasting legacy of depressed earnings.
Europe’s profound supply-side problems, including restrictive labour laws and high taxes, still cannot explain why it slumped in 2011 as the rest of the world began to recover.
The reason is that the European Central Bank (ECB) has persistently undershot its inflation target, putting the Eurozone into a state of perennial near-deflation, with too little demand to get European workers into jobs. Only more inflation will change this.
A lost decade now seems inevitable. It is up to the ECB to decide how bad it will be.
Read both sides of the debate here.