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Is Europe Doomed to Stagnation? An Analysis of the Current Crisis and Recommendations for Reforming Macroeconomic Policymaking in Euroland

Author

Listed:
  • Joerg Bibow

    (University of Hamburg Germany and The Levy Economics Institute)

Abstract

This paper challenges the view that external shocks caused Euroland's 2001 slowdown and subsequent stagnation. Instead, the design of Euroland's macro policymaking arrangements is found lacking in looking after sufficient domestic demand growth. In the event the ECB has failed on its stabilization role—a rather vital role given that fiscal policy is severely constrained by the Stability and Growth Pact. As a result, Europe is in a precarious situation of stagnation today, and under the current regime there is even a risk of self-reinforcing destabilization. Hence, reforming the regime is urgent. A nominal GDP target to be pursued by fiscal and monetary policies in cooperation would provide Europe with the growth anchor that is currently missing.

Suggested Citation

  • Joerg Bibow, 2003. "Is Europe Doomed to Stagnation? An Analysis of the Current Crisis and Recommendations for Reforming Macroeconomic Policymaking in Euroland," General Economics and Teaching 0306002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpgt:0306002
    Note: Type of Document - word perfect; prepared on PC; to print on HP/PostScript; pages: 52 ; figures: included
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    Cited by:

    1. Eckhard Hein & Torsten Niechoj, 2005. "Leitlinien für ein dauerhaftes Wachstum in der EU? Konzept und Wirkung der "Grundzüge der Wirtschaftspolitik"," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 31(1), pages 11-40.
    2. Jorg Bibow, 2004. "Fiscal Consolidation: Contrasting Strategies & Lessons From International Experiences," Economics Working Paper Archive wp_400, Levy Economics Institute.
    3. Truger, Achim & Hein, Eckhard, 2004. "Macroeconomic co-ordination as an economic policy concept : opportunities and obstacles in the EMU," WSI Working Papers 125, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
    4. Jorg Bibow, 2004. "Assessing the ECB's Performance since the Global Slowdown A Structural Policy Bias Coming Home to Roost?," Macroeconomics 0407026, University Library of Munich, Germany.
    5. Paolo Biraschi, "undated". "Searching for the optimal EMU fiscal rule:an ex-post analysis of the SGP reform proposals," Working Papers wp2008-7, Department of the Treasury, Ministry of the Economy and of Finance.
    6. Jörg Bibow, 2006. "Europe's Quest for Monetary Stability. Central Banking Gone Astray," International Journal of Political Economy, Taylor & Francis Journals, vol. 35(1), pages 24-43.
    7. Jorg Bibow, 2006. "How the Maastricht Regime Fosters Divergence as Well as Fragility," Economics Working Paper Archive wp_460, Levy Economics Institute.

    More about this item

    Keywords

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    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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