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Five Reasons the Euro-Optimists Are Wrong

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Five Reasons the Euro-Optimists Are Wrong

AEI,

5 min read
5 take-aways
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Dispel the myths: One expert says reports of an economic revival in the euro zone are deluded.

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Editorial Rating

7

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Recommendation

Policy expert Desmond Lachman challenges the theory that the European Union is on the brink of economic salvation. His brief paper skillfully rebuffs the five factors “euro-optimists” commonly present as evidence of a recovery. He exposes the cracks in their forecasts and warns that an improved economic outlook will be elusive in the short term. Although this learned work is short on details, getAbstract recommends it to academics, policy makers and financial services professionals looking for another view into the euro zone’s economic future.

Summary

The European economy is embroiled in its longest recession since World War II. While “euro-optimists” predict that an economic and political recovery is imminent, their prognosis is unrealistic because it’s based on “five myths”:

  1. The European economy is on the verge of a revival – This conclusion is unsound because stringent “budget austerity” measures are strangling peripheral nations’ economies, and European banks are curtailing credit. As members of the European single currency, these countries are powerless to apply monetary policy to alleviate the impact...

About the Author

Desmond Lachman is a resident fellow at the American Enterprise Institute. He is a former deputy director of the International Monetary Fund’s Policy Development and Review Department.

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