La Rentrée is upon us. The summer, such as it was, is over. Time to reflect. It’s Friday, late and I am tired. Fortunately I can be very, very brief. Four things are important to grasp.
- The European economy and, more latterly, its labour market had begun a recovery that was, overall, sluggish, and uneven between countries. But it was a start. Unemployment was falling slowly.
- In the course of the summer that recovery was aborted. We now face economic stagnation. If not worse. Unemployment is rising.
- The prime causes of the set-back were four. Inadvisable premature monetary tightening. Inadvisable premature fiscal tightening. The failure of policy makers to get a manageable sovereign debt crisis under control early. And, less importantly, external ‘shocks’ such as high energy prices and weaker demand growth in Japan and the US.
- Three out of four wounds were self-inflicted by European policymakers. Nice work guys and girls! Progressive economists warned about the dangers of premature tightening and argued for a different approach. They were ignored.
All the rest is details.
Une bonne Rentrée tout le monde!