Europe is suffering from sluggish growth. The reason for this does not lie with the stability pact, but the root cause for this problem is overregulated European markets. This overregulation not only has its effect on the economy directly, but also has indirect effects. On the other hand, the US has been able to achieve a sustainable growth due to its flexible labor market and a considerable rise in private investment. Although a number of policy measures were instigated for improving the euro zone economy, a more holistic approach is still required.
The problem is not the stability pact but the slow economic growth in the euro zone. After all, the Maastricht criteria, on which the stability pact is based, are ratios with GDP volume as the denominator. Because of the overregulation of its markets, Europe is suffering from sluggish growth, especially in comparison with developments in the United States over the last decade. Easing the terms of the stability pact is not the way to tackle this problem. The solution should be sought in our view at the root: overregulated markets. This article puts forward a proposal in this respect.
In the comparison between the euro zone and the United States, the article concentrates on the situations in Germany, France and Italy. In doing so, I do not wish to imply that the other euro zone countries do not matter. Rather, the reason is that development in the `EMU big three', which together account for more than 70% of the euro zone's GDP, are decisive in determining the direction of the euro zone's total economy. |
