Monday, June 15, 2009

Paul Krugman on the Recession in the EU

. Monday, June 15, 2009

The Guardian has a good interview with Paul Krugman on macroeconomic conditions in the EU.

"Britain's looking the best among the major European economies ... Britain actually may have stopped contracting - that's the most positive thing one can say." Elsewhere, PK attributes this to a devalued pound and a generally aggressive monetary policy. I think Britain should be quite pleased to not be constrained by EMU.

He also takes up the German puzzle: "How is it possible that Germany, which did not have a house price bubble, is having a steeper GDP fall than anyone else in the major economies?

His Answer: Germany depended upon exporting to the bubble regions of Europe, so they actually got side-swiped by the loss of those exports worse than the bubble regions themselves got hit.

His Concern Moving Forward: "We worry about the drag on world demand from the global savings coming out of east Asia and the Middle East, but within Europe there's a European savings glut which is coming out of Germany. And it's much bigger relative to the size of the economy."

Why is the German government so resistant to an aggressive response? It all seems so very Mellonesque.

Update: Scott Sumner concurs with PK's analysis of the UK.


Paul Krugman on the Recession in the EU
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